Question

The main purpose of the Federal Reserve Act was important because it ______.

• A. Made up for revenue lost by the Underwood Tarif
• B. Centralized financial power in one city-New York
• C. Allowed the president to set interest rates
• D. Created a mechanism to regulate the money supply
• E. Nationalized banks in the United States

Answer 1

The correct option is D Created a mechanism to regulate the money supply

The main purpose of the Federal Reserve Bank (the Fed) is to regulate the money supply, primarily by raising or lowering its interest rate for loaning money. The federal income tax made up for revenue lost by tariffs. The Federal Reserve Act was also designed to decentralize financial power. The president appoints the head of the Fed but cannot set interest rates or manipulate the bank. And banks have never been nationalized in the United States.