What primary function does the Federal Reserve serve in the economy?

The primary function of the Federal Reserve, often referred to as the Fed, is regulating interest rates, which plays a critical role in managing the economy's monetary policy. By influencing interest rates, the Federal Reserve can help control inflation, stabilize the currency, and encourage or restrict borrowing and spending in the economy.

When the Fed raises interest rates, it becomes more expensive to borrow money, which can help cool down an economy that is growing too fast and may lead to inflation. Conversely, when it lowers interest rates, borrowing becomes cheaper, stimulating spending and investment, which can help to bolster economic growth during a downturn. This ability to adjust interest rates is a vital tool for sustaining economic stability and promoting maximum employment.

Other options, such as setting educational standards, controlling public health policies, and managing foreign relations, fall outside the scope of the Federal Reserve’s authority and mission, as they pertain to different sectors of governance and public policy.