Chapter 5R, Problem 19MCQ

To determine

The correct option that is not a function of the Federal Reserve.

Answer to Problem 19MCQ

Option e is correct.

Explanation of Solution

Explanation for the correct option:

e.

Federal Reserve System is the central bank that is responsible for looking into matters related to the country’s banking system along with controlling its monetary base. It regulates banking activities but it is not responsible for ensuring the ban of deposits. Therefore, option e is correct.

Explanation for incorrect options:

a.

Federal Reserve is the central bank or institution that provides various financial services to banks. Therefore, option a is incorrect.

b.

Federal Reserve ensures that banks are conducting their activities properly so that norms are not violated. They regulate and supervise banks. Therefore, option b is incorrect.

c.

Federal Reserve ensures the stability of the financial system. It came into effect after the financial crisis so that no such consequences can occur in the future. Therefore, option c is incorrect.

d.

Monetary policies are regulated by the Federal Reserve through which stability in the financial system can be ensured. Therefore, option d is incorrect.

Economics Concept Introduction

Federal Reserve System: It is a central bank that looks after the banking system of the country along with the control of its monetary base. The monetary base is the sum of circulating currency and the reserves in the bank.