How does government intervene to lower inflation or unemployment?

The government acts on inflation through The Federal Reserve. The Federal Reserve acts on inflation by targeting interest rates through the reserve requirement. When interest rates are high, people want to keep money in their bank accounts, and inflation decreases. When interest rates are low, people are more willing to spend their money and inflation increases.

Once, the Federal Reserve actually pushed the United States into a recession once to battle especially high inflation. Ever since then, it has been very important for the Federal Reserve to keep inflation in check.

The government, as demonstrated during the latest recession, enacts many different stimulus packages to help the economy recover and help unemployment come down from extremely high percentages.