ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The Fed’s goals of maximum employment and price stability are generally complementary. An economy with low and stable inflation provides economic conditions that are friendly to business planning, saving, and investing, which results in a growing economy. A growing economy needs workers to produce goods and services.

Detailed explanation-2: -It is the Federal Reserve’s actions, as a central bank, to achieve three goals specified by Congress: maximum employment, stable prices, and moderate long-term interest rates in the United States (figure 3.1).

Detailed explanation-3: -The FOMC judges that low and stable inflation at the rate of 2 percent per year, as measured by the annual change in the price index for personal consumption expenditures, is most consistent with achievement of both parts of the dual mandate.

Detailed explanation-4: -It is responsible for managing monetary policy and regulating the financial system. It does this by setting interest rates, influencing the supply of money in the economy, and, in recent years, making trillions of dollars in asset purchases to boost financial markets.

Detailed explanation-5: -One of the goals of the Federal Reserve is price stability. For the Fed to achieve this goal, the rate of inflation should be low, such as 1% to 3%, and should be fairly consistent.