Which act established a system of federal banks and gave the government the power to control the money supply?

Which act established a system of federal banks and gave the government the power to control the money supply?

• A. Glass-Steagall Act
• B. Banking Act of 1933
• C. Currency Act of 1900
• D. Federal Reserve Act

Answer: (D)

Creating a central banking system gives the government a formal way to influence money supply and credit in the economy. The act did exactly that by establishing the Federal Reserve System, a network of regional banks overseen by a central governing body, which provides the tools for monetary policy—like adjusting reserve requirements, setting lending rates, and conducting open-market operations. This setup gives the government a structured means to manage liquidity, respond to financial stresses, and stabilize prices and employment over time. The other acts focus on different reforms: one tightened regulations after the Depression and separated banking activities, another dealt with currency standards rather than a central bank, and neither created a central banking system or endowed the government with monetary-policy powers. So the Federal Reserve Act is the one that matches the description.

Creating a central banking system gives the government a formal way to influence money supply and credit in the economy. The act did exactly that by establishing the Federal Reserve System, a network of regional banks overseen by a central governing body, which provides the tools for monetary policy—like adjusting reserve requirements, setting lending rates, and conducting open-market operations. This setup gives the government a structured means to manage liquidity, respond to financial stresses, and stabilize prices and employment over time. The other acts focus on different reforms: one tightened regulations after the Depression and separated banking activities, another dealt with currency standards rather than a central bank, and neither created a central banking system or endowed the government with monetary-policy powers. So the Federal Reserve Act is the one that matches the description.