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: -In such a situation, the Fed can guide economic activity back to more sustainable levels and keep inflation in check by tightening monetary policy to raise interest rates.

Detailed explanation-3: -Which of the following gave the Fed a dual mandate? The Employment Act of 1946.

Detailed explanation-4: -The Fed’s goals are often described as a “dual mandate” to achieve stable prices and also maximum employment. The goal of stable prices means keeping the inflation rate low and predictable. Success in achieving this goal also ensures “moderate long-term interest rates."

Detailed explanation-5: -The Federal Reserve seeks to control inflation by influencing interest rates. When inflation is too high, the Federal Reserve typically raises interest rates to slow the economy and bring inflation down.