What are two primary functions of the Federal Reserve?

The two primary functions of the Federal Reserve, as described in the correct answer, are to manage inflation and regulate U.S. monetary policy. The Federal Reserve, also known as the Fed, plays a crucial role in maintaining economic stability. Managing inflation is vital as it helps ensure that the purchasing power of the currency remains stable over time; high inflation can erode consumer confidence and savings. By regulating U.S. monetary policy, the Federal Reserve influences the availability and cost of money in the economy, which in turn affects interest rates, investment, and spending by consumers and businesses.

These responsibilities are central to the Fed's mandate of promoting maximum employment, stable prices, and moderate long-term interest rates. Thus, the functions of managing inflation and regulating monetary policy provide a framework for fostering a healthy and stable economy.