Problem Solving - GED Social Studies

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Question

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.

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

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Answer

The author tells you that "the Federal Reserve was created . . . in response to the frequent financial panics that would cripple the U.S. economy," and that "the powers of the Federal Reserve have expanded throughout the years, usually in response to other financial disasters." Thus it seems most likely that the powers of the Federal Reserve were expanded after the Great Depression because the American government felt that the extension of those powers would make a repeat of the Great Depression less likely. The author does not mention the opinions of the people at all, so while these might be somewhat acceptable answers, they are not supported by this passage.

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