Federal Reserve has the primary purpose of ensuring that the United States’ economy is strong. The Federal Reserve is responsible for implementing the country’s monetary policies. This includes ensuring that there are higher unemployment rates, affordable food prices and the appropriate long-term and short-term interest rate. When common commodities prices are kept low, the economy could achieve price stability while maintaining an average long term interest rate. Extreme work means the lowest possible level of employment or unemployment, while still maintaining an economic growth rate. Recent decades have shown it’s possible to keep unemployment low and maintain a strong labor market, without having unfavorable effects on growth. When unemployment fell below the threshold of sustainable levels, there was remarkable market adaptability. It brought about many benefits, and created opportunities for networks and families that were previously abandoned. A low rate of unemployment, absent other risks, isn’t cause for concern. The Fed will try to lower unemployment if it is high. The Fed will therefore try to decrease job losses resulting from severe valuations.
Stability is when businesses and buyers don’t need to fret about rising or falling prices while forming long-term contracts, buying, lending, or other transactions. According to the Federal Open Market Committee, a long-term rate of growth of 2% as measured by an annual increase in individual consumption’s price list is consistent with Federal Reserve mandates (Boivin and al., 492). The FOMC plans to increase its growth rate by 2% in the near future, which would be a more sustainable goal. Businesses and households can expect 2% annual growth, and they will be able to take prudent savings, purchase, and speculate decisions, contributing to a strong economy. (Friedman, 112). These 1970s were marked by high levels of growth and low unemployment. This phenomenon is known as “stagflation”. The Federal Reserve Act of 1977 amended the 1913 Federal Reserve document and defined the roles of the Board of Governors (Mishkin 13).
Congress specifically stated that Fed’s objectives should include “most extreme work”, stable costs and moderate long term income rates. (Bernanke & Ben, 13).