Federal Reserve Act

Definition

The Federal Reserve Act is a law passed in 1913 that established the Federal Reserve System, the central banking system of the United States. It was a key progressive reform that aimed to provide a more stable and responsive monetary policy to support the nation's economy.

5 Must Know Facts For Your Next Test

1. The Federal Reserve Act was signed into law by President Woodrow Wilson, a key progressive reformer, in 1913.
2. The Act established the Federal Reserve System as the central banking system of the United States, replacing the previous decentralized banking system.
3. The Federal Reserve System is responsible for conducting monetary policy, supervising banks, maintaining financial system stability, and providing banking services.
4. The Federal Reserve Act gave the Federal Reserve the power to set interest rates, control the money supply, and regulate banks, allowing it to influence economic conditions.
5. The creation of the Federal Reserve System was a significant progressive reform that aimed to provide a more stable and responsive monetary policy to support the nation's economy.

Review Questions

• Explain how the Federal Reserve Act was a key progressive reform during the Woodrow Wilson administration.
  • The Federal Reserve Act was a major progressive reform enacted during the Woodrow Wilson administration. It established the Federal Reserve System, the central banking system of the United States, which was designed to provide a more stable and responsive monetary policy to support the nation's economy. This was a significant step forward in addressing the economic problems associated with industrialization and urbanization, which were key concerns of the Progressive Movement. The Act gave the Federal Reserve the power to set interest rates, control the money supply, and regulate banks, allowing it to influence economic conditions and promote financial stability - core goals of progressive reformers at the time.
• Describe the role of the Federal Reserve System in conducting monetary policy and its impact on the economy.
  • The Federal Reserve System, created by the Federal Reserve Act, is responsible for conducting monetary policy in the United States. This includes setting interest rates, controlling the money supply, and regulating banks. By manipulating these levers, the Federal Reserve can influence economic conditions, such as inflation, employment, and economic growth. For example, the Federal Reserve can raise interest rates to slow down an overheating economy and curb inflation, or lower rates to stimulate borrowing and investment during economic downturns. The ability of the Federal Reserve to adjust monetary policy in response to changing economic conditions was a key progressive reform, as it provided a more flexible and responsive approach to managing the nation's economy compared to the previous decentralized banking system.
• Analyze the relationship between the Federal Reserve Act, the Progressive Movement, and the broader economic and social reforms of the early 20th century.
  • The Federal Reserve Act was a critical component of the broader Progressive Movement that sought to address the social, economic, and political problems associated with industrialization and urbanization in the early 20th century. By establishing the Federal Reserve System as the central banking authority, the Act gave the government more tools to manage the economy and promote financial stability - key goals of progressive reformers. The ability of the Federal Reserve to conduct monetary policy, regulate banks, and maintain economic conditions aligned with the progressive agenda of using government intervention to improve the lives of citizens and address the challenges of a rapidly changing society. The Federal Reserve Act was part of a larger wave of reforms, including trust-busting, labor protections, and social welfare programs, that transformed the role of the federal government in the economy and society during the Progressive Era. This interconnected relationship between the Federal Reserve Act, the Progressive Movement, and broader economic and social reforms was a defining feature of this transformative period in American history.

Related terms

Federal Reserve System:

The central banking system of the United States, created by the Federal Reserve Act, which consists of a Board of Governors and 12 regional Federal Reserve Banks.

Monetary Policy: The actions taken by a central bank, such as the Federal Reserve, to influence the money supply and interest rates in order to achieve economic goals like stable prices and full employment.

Progressive Movement: A broad reform movement in the late 19th and early 20th centuries that sought to address social, economic, and political problems associated with industrialization and urbanization.