Question

One of the Fed's most important jobs is supervision and regulation of member banks to prevent banking panics or disruptions. This is accomplished through:

a) Open market operations
b) Setting interest rates
c) Bank examinations and regulations
d) Monetary policy

Answer 1

The Fed's supervision and c) regulation of member banks, accomplished through bank examinations and regulations, is its means of preventing banking panics and disruptions.

Step-by-step explanation:

The Federal Reserve, often referred to as the Fed, is tasked with the supervision and regulation of member banks to prevent banking panics and disruptions. This is an essential aspect of its role in ensuring financial stability.

The primary means by which the Fed accomplishes this objective is through bank examinations and regulations, rather than open market operations, setting interest rates, or overarching monetary policy, which are other functions of the central bank.

These regulatory activities are crucial as they form part of a broader strategy to maintain a stable banking environment. The Fed inspects the operational soundness of banks.

Assesses their compliance with regulations, and sets standards to mitigate the risks of bank failures. Such supervision is intended to prevent financial stress that could lead to widespread economic repercussions, including deepening recessions.