ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The Federal Reserve System has been given a dual mandate-pursuing the economic goals of maximum employment and price stability. It does this by using a variety of policy tools to manage financial conditions that encourage progress toward its dual mandate objectives-in other words, conducting monetary policy.

Detailed explanation-2: -A dual mandate is the practice in which elected officials serve in more than one elected or other public position simultaneously.

Detailed explanation-3: -It wasn’t until legislation in the 1970s rolled along that Congress gave the Fed the framework of what would later be known as a “dual mandate, ” through the Federal Reserve Reform Act of 1977 and the Humphrey-Hawkins Act of 1978.

Detailed explanation-4: -The primary tools that the Fed uses are interest rate setting and open market operations (OMO). The Fed can also change the mandated reserves requirements for commercial banks or rescue failing banks as lender of last resort, among other less common tools.

Detailed explanation-5: -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).