What is the primary objective of the Federal Reserve's monetary policy?

The primary objective of the Federal Reserve's monetary policy is to stabilize prices and maximize employment. This goal reflects the dual mandate given to the Federal Reserve, which is to foster economic conditions that achieve both stable prices and full employment. Stabilizing prices is crucial to avoiding inflation and deflation, which can severely disrupt economic activity. When prices are stable, consumers and businesses can make more informed financial decisions, leading to increased economic growth.

Maximizing employment is equally important, as high levels of employment contribute to a healthy economy. When employment levels are high, individual workers have greater purchasing power, which stimulates demand for goods and services. The Federal Reserve uses various tools, like setting interest rates and conducting open market operations, to influence money supply and liquidity in the economy to achieve these objectives.

The other choices focus on aspects that, while important in the broader economic landscape, do not align with the Federal Reserve's core objectives. For instance, increasing taxes on citizens does not fall under the Federal Reserve's purview, as taxation is a function of fiscal policy handled by Congress. Controlling stock market volatility is more aligned with financial regulation and oversight rather than the broader goals of monetary policy. Lastly, minimizing bank fees pertains to consumer protection and the operational aspects of