Question

What did the Federal Reserve refuse to do in order to keep a run on the banks from causing a failure of the US banking system? A) The Fed refused to act and ignored the situation completely. B) The Fed refused to enact a loose monetary policy by releasing money into the system. C) The Fed refused to enact a tight monetary policy by tightening the monetary policy to stop inflation. D) The Fed called in all the gold reserves in order to keep the Federal Government running during the crisis.

Answer 1

The correct answer is B) The Fed refused to enact a loose monetary policy by releasing money into the system.

What the Federal Reserve refused to do in order to keep a run on the banks from causing a failure of the US banking system was "The Fed refused to enact a loose monetary policy by releasing money into the system."

In the United States, the Federal Reserve acts as the central bank of the country. The also called Fed oversees the banking operations and controls inflation to maintain stable prices. Another important function of the Fed is that it regulates the banks of the country and works hard to maintain the stability of the financial markets in order to avoid another crash such as the stock market crash that provoked the Great Depression of 1929. With a good monetary policy in the United States, the nation's economy can constantly grow.

Answer 2

B) The Fed refused to enact a loose monetary policy by releasing money into the system.

Step-by-step explanation:

The Federal Reserve System in general had no arrangement set up in the two months paving the way to the national banking holiday. Moreover, Wicker noticed that the absence of understanding among the twelve Reserve Bank governors on a procedure added to the need to suspend payments.

Wicker additionally proposed that, instead of the RFC having lender-of-last-resort responsibilities, the Fed could have offered help to harried banks whose failure would make dread and uncertainty spread.