What is one of the key functions of the Federal Reserve?

The Federal Reserve, often referred to as the Fed, plays a crucial role in managing the nation's monetary policy, which includes managing inflation and stabilizing the economy. One of its primary objectives is to control inflation and ensure that price levels remain stable. By adjusting interest rates and employing various monetary policy tools, the Fed can influence economic activity, either stimulating growth during a recession or cooling it during periods of inflation.

Additionally, stabilization of the economy involves keeping unemployment low and promoting sustainable economic growth, which can be adversely affected by high inflation. The performance of the economy relies on the Fed effectively balancing these factors, making this function pivotal in maintaining economic health.

The other options, such as establishing fiscal policy and controlling international trade, are not direct functions of the Federal Reserve; instead, these areas are generally managed by the government and other regulatory bodies. Regulating foreign banks is also outside the main purview of the Fed, as its focus is primarily on domestic monetary policy and the stability of the banking system within the United States.