Final answer:
The statement is mostly true, highlighting that the Fed's goals include growing GDP, maintaining a low inflation rate, and controlling monetary supply as part of its economic mandate.
The Fed's key goals are stable prices, full employment, and economic growth, though it emphasizes inflation control and also considers interest rates as part of its intermediate targets.
Step-by-step explanation:
The statement that the Federal Reserve (the Fed) aims to grow GDP and maintain a low, steady rate of inflation, and also seeks to control intermediate targets like the growth of the money supply,
is mostly true. It reflects the broader economic goals of the federal government, which include stable prices, full employment, and economic growth.
These goals can occasionally come into conflict, requiring the Fed to prioritize among them, sometimes focusing more on controlling inflation and other times on stimulating economic growth.
Since the late 1970s, the Fed has indeed placed a high priority on controlling inflation, particularly after experiences with high inflation rates in that decade.
This focus carries on to present-day policy, where price stability is often the central target, with a preferred inflation rate of around 2% being a common guideline for setting monetary policy.
In terms of intermediate targets, the Fed has also considered interest rates, especially the federal funds rate, to influence economic conditions.
The relationship between these targets and broader economic objectives is complex, and the Fed must navigate this with its policy tools to help ensure macroeconomic stability.
Furthermore, historical episodes, such as the advocacy of economist Milton Friedman and others in the 1970s, suggest that steady money supply growth could enhance economic stability.
While this policy approach has not been strictly adopted by the Fed, it highlights the importance of managing the money supply as an intermediate target.