Final answer:
The Federal Reserve performs a balancing act to ensure economic stability by using tools of monetary policy.
Step-by-step explanation:
The Federal Reserve, also known as the Fed, performs a balancing act in order to ensure economic stability. The Fed's main objectives are to promote maximum employment, stable prices, and moderate long-term interest rates. To achieve these goals, the Fed uses tools of monetary policy, such as adjusting the money supply and interest rates.
For example, during times of economic growth, the Fed may raise interest rates to prevent inflation. On the other hand, during a recession, the Fed may lower interest rates to stimulate borrowing and spending. The Fed carefully monitors economic indicators, such as employment rates and inflation levels, to determine which tool of monetary policy will be most effective in maintaining stability.
Overall, the Federal Reserve plays a crucial role in balancing the needs of the economy and ensuring stable financial conditions for the public.