What role does the Federal Reserve have in the economy?

The Federal Reserve plays a crucial role in the economy primarily by regulating monetary policy and maintaining financial stability. This involves controlling the money supply and interest rates, which in turn helps to influence inflation, employment levels, and overall economic growth. By adjusting the federal funds rate, the Federal Reserve can either encourage borrowing and spending during economic downturns or cool off the economy when inflation is rising.

Additionally, the Federal Reserve acts as a lender of last resort to banks, ensuring that the banking system remains stable and that financial institutions have access to necessary funds during periods of liquidity crisis. By supervising and regulating banks, it helps maintain the health of the financial system and protect consumers.

The other options do not accurately reflect the Federal Reserve's functions. For instance, managing the stock market is primarily the responsibility of private investors and regulatory bodies like the Securities and Exchange Commission (SEC). The Federal Reserve does not oversee personal investment accounts as that's under the purview of individual financial institutions and their customers. Lastly, setting individual tax rates is the responsibility of the legislative branch of government, specifically Congress, and not the Federal Reserve.