What role did the Federal Reserve play in the U.S. economy?

The Federal Reserve, often referred to as the Fed, plays a crucial role in the U.S. economy by managing the nation's monetary policy. This includes regulating the money supply, setting interest rates, and overseeing the banking system to ensure stability in the financial markets. By adjusting interest rates, the Federal Reserve can influence economic activities such as spending, investment, and inflation. For example, lowering interest rates tends to encourage borrowing and can stimulate economic growth, while raising rates may help control inflation.

Through its monetary policy, the Federal Reserve aims to achieve maximum employment, stable prices, and moderate long-term interest rates, which collectively contribute to a healthy and stable economy. This role is fundamental to maintaining the financial health of the nation and responding to economic fluctuations.