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The dual mandate of the Federal Reserve refers to its two primary objectives as outlined by the United States Congress. These objectives guide the Federal Reserve's monetary policy decisions:
Price Stability: This aspect of the mandate aims to keep inflation in check and maintain stable prices in the economy. The Federal Reserve seeks to avoid both high inflation, which erodes the purchasing power of money, and deflation, which can hinder economic growth and lead to economic instability.
Maximum Employment: The Federal Reserve also aims to promote maximum sustainable employment in the economy. This means striving for a level of employment where most people who are willing and able to work can find jobs. However, it's important to note that the Federal Reserve does not have direct control over employment levels, as employment is influenced by various factors beyond monetary policy.
These dual objectives acknowledge the importance of both price stability and employment in achieving overall economic health and prosperity. The Federal Reserve regularly assesses economic conditions and adjusts its monetary policy tools, such as interest rates and open market operations, to pursue these goals.
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