What is the primary role of the Federal Reserve in the economy?

The primary role of the Federal Reserve in the economy is to control the money supply and interest rates. This central banking system is fundamental in managing the country's monetary policy, which involves regulating the amount of money circulating in the economy and influencing the cost of borrowing money through interest rates. By adjusting the money supply, the Federal Reserve can help stabilize prices, maximize employment, and promote economic growth. The manipulation of interest rates also plays a critical role in influencing consumer spending and business investment, which are vital components of overall economic activity.

In contrast to the other options, government spending management is primarily a function of fiscal policy, overseen by the executive and legislative branches. Foreign trade is regulated by trade agreements and policies, not directly by the Federal Reserve. Additionally, while the Federal Reserve monitors the financial system, it does not regulate the stock market in the traditional sense; this is primarily the responsibility of agencies like the Securities and Exchange Commission (SEC). Therefore, option C accurately reflects the central bank's key responsibilities in fostering economic stability and growth.