How the Fed Interprets Their 'Dual' Mandate

The Fed actually has three mandates: price level stability, maximum employment, and moderate long-term interest rates. However, the satisfaction of the first two mandates should fulfill the third, so, most people refer to the Fed's "dual" mandate: price level stability and maximum employment. There is a tension between these two mandates as the efforts to fulfill one of the mandates may result in a deterioration of the other. In other words, Fed activities to bring about price level stability may result in higher unemployment rates, and activities to ensure maximum employment may result in a lack of price level stability.

It is also important to note that the Fed has reinterpreted these mandates to make the mandates more compatible...from an economic standpoint. They have interpreted price level stability as a price level that rises by 2 percent a year (i.e., an inflation target of 2 percent), and they have interpreted maximum employment as an unemployment rate equal to the natural rate of unemployment.

This video is made for 1st year college students or AP/IB Economics students. It focuses on foundational economic concepts.

[LanguagesWithAndrew]

Good explanation but: SLOW DOWN. I've made this mistake before, too, in making YouTube videos. Modern audiences don't have the attention span of a gnat, as is commonly believed. If what you're saying is interesting to them, clear, well-explained, and doesn't have too much fluff, then they'll sit there and listen to you for however long it takes.