What is the primary purpose of the Federal Reserve?

The primary purpose of the Federal Reserve is to manage monetary policy, which involves regulating the money supply and interest rates to achieve macroeconomic goals such as stable prices, full employment, and moderate long-term interest rates. By adjusting the monetary policy, the Federal Reserve can influence economic activity, control inflation, and respond to economic fluctuations, which ultimately aims to ensure a stable financial system.

While issuing currency, regulating bank interest rates, and overseeing commercial banking are all important functions of the Federal Reserve, they are essentially means to an end. The overarching goal remains to effectively manage monetary policy, which is the core responsibility that impacts the economy as a whole. Thus, option D captures the essence of the Federal Reserve's role in the financial system and its broader economic objectives.