The Federal Reserve monetary policy goals of maximum employment means

Question

Quizplus · Accepted Answer

The Federal Reserve's monetary policy goals of maximum employment mean keeping the unemployment rate close to the natural unemployment rate, which is the non-cyclical rate of unemployment that exists when the labor market is in equilibrium. A zero percent unemployment rate (choice A) is not feasible, as some level of unemployment is considered natural even in a healthy economy. Similarly, a zero percent natural unemployment rate (choice B) is not possible, as there will always be some level of frictional and structural unemployment due to factors such as job market churn and skills mismatches. Minimizing cyclical unemployment is certainly a desired outcome, but this is not the same as the overall goal of maintaining maximum employment (choice D).

The Federal Reserve Monetary Policy Goals of Maximum Employment Means