Final answer:
The Federal Reserve adjusts interest rates to prevent inflation, and this action falls under its responsibility to control monetary policy and influence economic activity.
Step-by-step explanation:
The action taken by the Federal Reserve that aligns with its functions is D. Adjusting interest rates to prevent inflation. The Federal Reserve's main avenue for controlling monetary policy is by adjusting interest rates, which is accomplished through its open market operations, changing reserve requirements, and altering the discount rate. These policy tools are used to influence the nation's level of economic activity, which in turn helps to manage inflation and stimulate the economy when necessary.The Fed's actions affect the money supply and credit conditions. For example, by purchasing assets off banks' balance sheets, it can inject money into the banking system, affecting the amount of funds available to lend and influencing short-term interest rates. Adjusting interest rates is a key measure in either curbing inflation when the economy is growing too quickly or encouraging borrowing and spending during economic downturns.