What role does the Federal Reserve play in the U.S. economy?

The Federal Reserve, often referred to as the Fed, is primarily responsible for conducting monetary policy and regulating the banking system in the United States. Its primary objectives include promoting maximum employment, stabilizing prices, and moderating long-term interest rates. Through tools such as open market operations, the discount rate, and reserve requirements, the Fed manages the money supply and interest rates, influencing economic activity.

Additionally, the Federal Reserve has a crucial regulatory role in ensuring the stability of the banking system. It supervises and regulates banks to protect the safety of deposits, enforce banking laws, and maintain consumer confidence in the financial system. This regulatory oversight helps prevent banking crises and promotes a sound and efficient financial system.

The other options, while referring to important aspects of government functions, do not accurately represent the responsibilities of the Federal Reserve. Fiscal policy and tax rates are managed by Congress and the Executive Branch, trade tariffs are enforced by the Department of Commerce and International Trade Administration, and social security funds are managed by the Social Security Administration. Thus, B is the correct answer, as it encapsulates the core functions of the Federal Reserve within the U.S. economy.