Economics (7th Edition) (What's New in Economics)
Economics (7th Edition) (What's New in Economics)
7th Edition
ISBN: 9780134738321
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
Question
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Chapter 26, Problem 26.1.1RQ
To determine

The Fed and its responsibilities.

Expert Solution & Answer
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Explanation of Solution

The Congress established the Fed in 1913 by passing the Federal Reserve Act 1913. When it was established, the main responsibility of the Fed was to prevent bank panics by making discount loans to banks. Congress broadened the Fed’s responsibilities in response to the Great Depression in the 1930s. It amended the Federal Reserve Act to give the Federal Reserve Board of Governors broader responsibilities to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates.

Economics Concept Introduction

Concept introduction:

Federal Reserve System (the Fed): The Fed is the central banking system of the United States, which is comprised of the Federal Reserve Board, the 12 Federal Reserve Banks, the Federal Open Market Committee, and the national and state member banks.

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When Congress established the Federal Reserve in 1913, what was its main responsibility? When did Congress broaden the Fed's responsibilities?
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