Test: GED Social Studies

The following question refers to the information contained in this passage.

The Federal Reserve is the central banking system of the United States. The roles of the Federal Reserve include regulating the monetary policy and supply, preventing financial panics, and supervising banking institutions. The Federal Reserve was created early in the twentieth century primarily in response to the frequent financial panics that would cripple the U.S. economy, most prominent of which was the Panic of 1907. The powers of the Federal Reserve have expanded throughout the years, usually in response to other financial disasters like the Great Depression. Recent evidence suggests the Federal Reserve is essentially powerless to prevent the destabilizing force that is our boom and bust economy.

1.

Why do you think the powers of the Federal Reserve expanded after the Great Depression?

The Federal Reserve was directly responsible for the Great Depression, so the government sought to amend it’s powers

The people demanded that the powers of the Federal Reserve be expanded to prevent a further outbreak of economic depression

The people no longer trusted the financial institutions and refused to put their money into banks without the guarantee of the Federal Reserve protecting them

The government felt that if the economy was under closer control and greater scrutiny, a repeat of the Great Depression would be less likely

The government believed that the Federal Reserve was deficient and needed to be rebuilt or reformed in order to prevent another financial panic

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