Question

Which statement best describes how the Fed responds to recessions?

Answer 1

The correct answer is option D " It increases the money supply.". Federal Reserve manages the money of the entire nation and most of the financial institutions in the country. By creating money during recessions, the Fed stimulates the domestic market which helps to move the money and overcome recessions.

Answer 2

(d) It increases the money supply.

Further Explanations:

Federal Reserve act of 1913 was enforced by Woodrow Wilson on 23rd December 1913 that established the Federal Reserve System or the Central Banking system of the United  States. It was implemented by the United States  63rd Congress after the panic of 1907.

The economical panic that occurred in 1907 reassured the need for a central banking system in the united states. After the presidential election of 1912, Congressman  Carter Glass and Robert Broney Owen the senator drafted a bill for the establishment of central banking that called for private dominance of the banking system. The bill also received support from the progressives such as William Jennings Bryan who favored the control of government over the banking system. Wilson assured the bill to be passed from both the houses without any amendments and made it top priority agenda.

The act carried both domestic and international implications for the economic system of the United States as it controlled and regulated the inflation and immobilization of currency circulation in the US.

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Answer Details

Grade: High school

Subject: US History

Chapter:Federal Reserve system

Keywords:Federal Reserve Act, Woodrow Wilson, Federal Reserve System, Central Banking system, United  States, Carter Glass, Robert Broney Owen, William Jennings Bryan