The Fed\'s dual mandate is to achieve. a price level (hat rises at less than 5 p

Question

The Fed's dual mandate is to achieve. a price level (hat rises at less than 5 percent a year and an unemployment rate of less than 5 percent stable prices and minimum unemployment a price level that rises at less than 10 percent a year and an unemployment rate of less than 7 percent an inflation rate between 1 and 3 percent a year and a natural unemployment rate of 5 percent stable prices and maximum employment The means to achieving the goals of the dual mandate are. lowering the real interest rate to increase investment raising the real interest rate to increase saving. increasing the long-run growth of the monetary and credit aggregates above the economy's long-run growth rate slowing the long-nm growth of the monetary and credit aggregates below the economy's long-run growth rate maintaining the long-run growth of the monetary and credit aggregates commensurate with the economy's long-run potential to increase production

Explanation / Answer

Q1. In 1977, US Congress amended the Federal Reserve Act and inserted the three monetary policy objective with respect to administration of monetray policy by Fed.

The three objectives are as follows -

1. Maximizing employment

2. Stabilizing prices

3. Moderating long-term interest rate

Out of these three objectives, first two (maximizing employment and stabilizing prices) are referred to as dual mandate of Federal Reserve.

Thus, the Fed's dual mandate is to achieve stable prices and maximum employment.

Hence, the correct answer is option (E).

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