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QuizMultiple Choice

Financial Institutions and Banking — Quiz

Question 2 • Personal Finance

Why did the US Congress create the Federal Reserve System in 1913?

Answer
A
to establish a central bank that would provide loans for people who were denied them at local banks
B
to establish a central bank where American citizens could deposit their money
C
to establish a central bank to store the money used by the federal government
D
to establish a central bank that would help smaller banks survive during economic crises

Explanation

Congress created the Federal Reserve System to make the banking system more stable, especially during financial panics. The Fed could provide emergency support to banks and help prevent failures from spreading, including among smaller banks. Its purpose was not mainly to make ordinary loans to individuals or serve as a place for citizens or the federal government to deposit money.

AI-written and checked against the verified answer.

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