DECA Financial Consulting Complete Practice Exam

The role of the Federal Reserve, often referred to as the Fed, is primarily focused on managing the U.S. economy through the control of interest rates and the money supply. This is essential for maintaining economic stability and achieving the goals of maximum employment, stable prices, and moderate long-term interest rates.

By adjusting interest rates, the Federal Reserve influences borrowing costs for individuals and businesses. Lowering interest rates typically encourages more borrowing and spending, which can stimulate economic growth. Conversely, raising interest rates can help cool down an overheating economy and control inflation by making borrowing more expensive.

Additionally, the Fed has the ability to adjust the money supply through various mechanisms, such as open market operations, reserve requirements, and the discount rate. By doing so, it can help ensure that there is enough liquidity in the economy for businesses and consumers to operate effectively.

Other choices do not accurately represent the primary functions of the Federal Reserve. Issuing new government regulations, enforcing tariffs, or providing loans to international businesses are outside the scope of its primary responsibilities. Therefore, the Federal Reserve's focus on controlling interest rates and managing the money supply is fundamental to its role in supporting the overall health of the U.S. economy.