Question

What is a main goal of the federal reserve in its monetary policy?

Answer 1

The main goal of the Federal Reserve in its monetary policy is the regulation of the stock market

The responsibility of the Federal Reserve is to promote a stable and strong US economy. The Federal Reserve is saddled with the responsibility of controlling the US monetary policies to promote 3 key areas of the Economy which include employment sustainability, ensure stable prices and come up with moderate interest rates.

Further Explanation

Employment sustainability means to drives policies that would promote employments and also ensures the stability of inflation rates

The feds must also ensure the prices of goods and services are stable so that the public won’t have to be worried about unstable prices. When there is stability in the prices of goods and services, the long-term interest rate would be moderate because these two economic indices go together.

The Federal Reserve role is very important in the economy of the United States and it is made up of the Board of governors.

Some of the roles of the Federal Reserve also include

• The fed determines the discount rate for commercial banks
• It manages inflation
• It controls the banking system
• It supervises the activities of commercial banks.
• Therefore, the main goal of the Federal Reserve in its monetary policy is the regulation of the stock market

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KEYWORDS:

• monetary policy
• federal reserve
• central bank
• employment
• interest rate

Answer 2

The Federal Reserve has three main goals regarding its monetary policy, which are the following:

1. The maximum possible and sustainable rate of employment
2. To maintain stable prices
3. Moderate long-term interest rates.

To achieve these goals, the Federal Reserve uses four tools which are commonly known to us as discount rates (interest rates to commercial banks for short-term loans), operations of the open market (Wall Street), the interest put on reserves and reserve requirements. These four tools affect the amount of money available in the banking system and determine the effectiveness of the goal achievement.