In terms of economic policy, which of the following is typically a responsibility of the Federal Reserve?

Setting interest rates is a fundamental responsibility of the Federal Reserve, which serves as the central bank of the United States. By adjusting the federal funds rate, the Fed influences the overall cost of borrowing money, affecting consumer spending, business investment, and, ultimately, economic growth. This monetary policy tool plays a crucial role in managing inflation and stabilizing the economy.

In contrast to the Federal Reserve's role, tax collection is managed by the Internal Revenue Service (IRS), and budget allocation is typically the responsibility of the federal government through Congress. Regulatory compliance, while essential for various financial institutions, falls under different regulatory agencies such as the Securities and Exchange Commission (SEC) and the Consumer Financial Protection Bureau (CFPB). The Fed does engage in regulatory oversight of banks but does not handle compliance in the same sense as those agencies. Thus, setting interest rates is distinctly a function of the Federal Reserve, highlighting its overarching influence in shaping economic policy.