What is the primary function of the Federal Reserve?

The primary function of the Federal Reserve is to regulate the U.S. monetary system and control the money supply. Established in 1913, the Federal Reserve serves as the central bank of the United States, and its role is crucial for maintaining economic stability. By managing the money supply and interest rates, the Federal Reserve influences overall economic activity, including investment, consumer spending, and inflation.

Through its monetary policy tools, such as open market operations, the discount rate, and reserve requirements, the Federal Reserve can expand or contract the amount of money in circulation. This ability to control the money supply helps to achieve key objectives like maximizing employment, stabilizing prices, and moderating long-term interest rates. Overall, the central bank's actions have a profound impact on the economy, making its role in regulating the monetary system essential.