What are the Federal Reserve's monetary policy goals?

• A. Maximize employment, stabilize prices, and moderate long-term rates
• B. Maximize inflation and unemployment
• C. Maintain fixed exchange rate
• D. Target GDP growth above 10%

Answer: (A)

The main idea being tested is what the Federal Reserve aims to achieve with its monetary policy. The Fed’s mandate centers on three pillars: maximum employment, stable prices, and moderate long-term interest rates.

Maximum employment means aiming for a strong labor market where as many people as possible who want to work can find jobs. Stable prices refer to keeping inflation low, predictable, and steady so that households and businesses can plan and spend with confidence. Moderate long-term interest rates help ensure borrowing costs for households and firms don’t swing wildly, supporting sustainable growth over time.

This combination guides how the Fed uses its tools—like adjusting the federal funds rate, conducting open-market operations, and setting reserve requirements—to influence overall demand and financial conditions. The other options don’t fit because they either misstate the goals (inflation and unemployment are not goals to be maximized, but managed carefully), reference instruments the Fed doesn’t target (a fixed exchange rate), or propose targets the Fed does not pursue (extremely high GDP growth).