Final answer:
The goal of the federal government and the Federal Reserve is to maintain low inflation, ideally between 1% and 2%, to foster stable prices and economic growth, prevent a decline in living standards, and achieve broader economic health.
Step-by-step explanation:
The federal government and the Federal Reserve strive to maintain a specific rate of inflation to ensure a strong economy, aiming for stable prices, full employment, and economic growth. Historically, high periods of inflation, such as those after the World Wars and in the 1970s, have led to policies designed to stabilize inflation. In recent decades, an ideal inflation rate has often been around 2% to 4%, with a major goal being low inflation—an inflation rate of 1–2%—to avoid a decline in living standards due to prices rising faster than wages. Central figures like Ben Bernanke have been advocates of inflation targeting, highlighting a preferred inflation target between 1% and 2% to maintain economic health alongside other objectives such as managing interest rates, the budget deficit, and trade balance.