The Federal Reserve plays a crucial role in stabilizing the economy through monetary policy. By adjusting interest rates, the Fed can influence borrowing, spending, and investing decisions. This, in turn, affects inflation and employment levels. When the economy is slowing down, the Fed can lower interest rates to encourage borrowing and stimulate economic activity. Conversely, when there are signs of inflation or economic overheating, the Fed may raise interest rates to cool down the economy. Through these actions, the Federal Reserve helps maintain a balance in the economy, ensuring long-term stability and sustainable growth for the benefit of all.