The primary objective of the monetary policy of the Fed should be
A) low rates of unemployment.
B) the growth rate of real GDP.
C) the achievement of price stability.
D) the regulation of financial institutions.

Question

Quizplus · Accepted Answer

The primary objective of the monetary policy of the Fed is the achievement of price stability, which means keeping inflation under control. This is because high and volatile inflation can harm the economy by reducing confidence, creating uncertainty, and increasing transaction costs. While low rates of unemployment and the growth rate of real GDP are important goals, they are secondary to price stability which is the foundation for long-term economic growth. The regulation of financial institutions is also important, but it is not the primary objective of the monetary policy of the Fed.

The Primary Objective of the Monetary Policy of the Fed