What is the function of the Federal Reserve in the United States economy?

The Federal Reserve plays a crucial role in the U.S. economy by conducting monetary policy and providing financial services. Its primary functions include regulating the money supply, controlling inflation, and managing interest rates—all of which are essential for maintaining economic stability. By adjusting the federal funds rate and utilizing various monetary tools, the Federal Reserve influences borrowing costs for individuals and businesses, affecting overall economic growth.

Additionally, the Federal Reserve provides financial services to depository institutions and acts as a bank for the U.S. government, fulfilling various financial transactions and maintaining the payment system's efficiency and security. This comprehensive involvement in the economy ensures the central bank can respond to economic changes effectively, promoting a stable financial environment.

In contrast, the other options refer to functions that do not align with the Federal Reserve's core responsibilities. The regulation of stock exchanges is primarily handled by the Securities and Exchange Commission (SEC), management of fiscal policies involves decisions related to government spending and taxation typically made by Congress and the Treasury, and oversight of international trade agreements falls under the purview of the Office of the United States Trade Representative.