Question 2 of 16 • AFC Personal Financial Literacy and Economics S2
Read two excerpts from a speech by economist Ben Bernanke, former Chair of the Federal Reserve."Yet another striking feature of the Great Contraction [Depression] in the United States was the massive extent of banking panics and failures, culminating [resulting] in the Bank Holiday of March 1933, in which the entire US banking system was shut down. During the Depression decade, something close to half of all US commercial banks either failed or merged with other banks.”"The best thing that central bankers can do for the world is to avoid such crises by providing the economy with, in Milton Friedman’s words, a ‘stable monetary background.’. . .”—Ben Bernanke, 2002
Answer
A
Bank failures during the Depression were unavoidable no matter what the Fed did.
B
The Fed caused bank failures during the Depression by refusing to lower interest rates.
C
The Federal Reserve gains too much power whenever there are failing banks or other crises.
D
The Federal Reserve could have increased the money supply to help failing banks in the crisis.