To meet the dual mandate, the Fed must:
A) maintain price stability and keep unemployment near the NAIRU.
B) maintain full employment and a 4 percent real GDP growth rate.
C) maintain price stability and keep interest rates low.
D) maintain full employment and keep firm profits high.

Question

Quizplus · Accepted Answer

The dual mandate refers to the Fed's responsibility to both maintain price stability and promote full employment. The NAIRU (non-accelerating inflation rate of unemployment) represents the unemployment rate at which inflation is stable. Therefore, the best choice is A, as it correctly identifies the two goals the Fed must achieve to fulfill the dual mandate. The other choices do not accurately reflect the Fed's responsibilities.

To Meet the Dual Mandate, the Fed Must