Question

Why did President Wilson establish the Federal Reserve System?

1) to help the federal government keep the budget balanced
2) to give trusts more opportunities to expand their businesses
3) to create banks that could collect the new federal income tax
4) to regulate the money supply and prevent future economic panics

Answer 1

President Wilson established the Federal Reserve System in 1913 to regulate the money supply and prevent future economic panics by creating a central bank that would oversee the nation's monetary policy and provide stability to the banking sector.

Step-by-step explanation:

President Woodrow Wilson established the Federal Reserve System in 1913 with the aim to provide a more stable and secure banking system in the United States. The main purpose of the Federal Reserve, often referred to as the Fed, was to regulate the money supply and to provide a safeguard against economic panics, which had plagued the nation's financial system until that point. The Federal Reserve Act enabled the creation of twelve regional reserve banks that were regulated by the Federal Reserve Board, a group appointed by the President. This central banking system was empowered to influence monetary policy, including the manipulation of the discount rate to encourage borrowing during economic downturns, or conversely, to control inflation by raising interest rates to curb excessive borrowing. The system also plays a key role in ensuring liquidity for banks, supervising and regulating the banking industry, and acting as a lender of last resort.