Future Business Leaders of America (FBLA) Securities and Investments Practice Test

What is NOT a function of the Federal Reserve?

1. Conducting monetary policy

2. Regulating commercial banking

3. Setting tax rates

4. Providing financial services to the government

The correct answer is: Setting tax rates

The option that identifies a role that is not a function of the Federal Reserve is setting tax rates. The Federal Reserve primarily focuses on monetary policy, which includes managing interest rates and controlling the money supply to achieve economic stability and growth. Additionally, the Federal Reserve plays a crucial role in regulating commercial banking to ensure the stability of the financial system and protect depositors' interests. It also provides financial services to the government, such as managing the Treasury's accounts and facilitating payments. However, the setting of tax rates falls under the jurisdiction of the U.S. Congress and the Department of the Treasury, which is responsible for tax policy and revenue generation for the federal government. This clear delineation of responsibilities underscores why setting tax rates is not within the Federal Reserve's functions.