The statement correctly describes the federal reserve's behaviour The Federal Reserve would strive to "offset a" negative shock to aggregate demand with an increase in the money supply.
This is the central bank of the united states created by congress to provide the nation with a safer, more flexible and more stable monetary and financial system.
As the most powerful economic institution in the united states, its power and responsibilities includes setting interest rates, managing the money supply, and regulating financial markets.
Hence, the main function of the federal reserve is to set U.S. monetary policy to promote maximum employment and stable prices in the U.S. economy.
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