Answer the question below. Do the reading and answer the question correctly. Thank you. Littell/Houghton Mifflin CompanyREVIEW.CALIFORNIA CONTENTSTANDARD 11.6.1Money and the EconomySpecific Objective: Describe the monetary issues of the late nineteenth and earlytwentieth centuries that gave rise to the establishment of the Federal Reserve and theweaknesses in key sectors of the economy in the late 1920s.Read the summary to answer questions on the next page.Establishing the Federal Reserve SystemThrough the late 1800s, banks often closed during economic crises. The federalgovernment or the banking system could not increase the supply of money or credit.People lost what they deposited, and paper money could not be exchanged for gold.Crises in 1873, 1883, and 1893 caused many banks to fail and businesses to gobankrupt. After a huge bank failed in 1907, Congress came up with a plan.• The Federal Reserve System was established in 1913 under President Wilson.• The Federal Reserve System still functions today to prevent bank failures andregulate the supply of money.A Weak Economy That Seemed StrongFrom the beginning of World War I in 1914 until 1929, everyone believed the U.S.economy was stronger than it had ever been. But during the late 1920s, problems inthe economy began to build up. Before the stock market crashed in 1929, the U.S.economy had the following problems:Uneven distribution of wealth-The richest people got richer while workers' wagesincreased only slightly. With only a small increase in their income, most people couldn'tafford to buy all of the products of U.S. industry.Too much production with too little demand-Factories continued to producemore and more goods, but people could not afford them. Warehouses were filled withunsold goods. Most major industries had slowed down by the middle of 1929.Widespread use of credit-People began to buy goods on credit. Many owed moremoney than they could pay back. By the end of the 1920s, buying slowed.Stock speculation-Because it seemed the stock market would always keep rising,many people borrowed money to buy stocks. If the stocks did not rise, those who hadborrowed would not have the money to pay for them.Farm problems-Farmers had problems as soon as the war ended. Many hadborrowed money to buy more land and grow more crops. After the war, Europeanfarmers started producing again, and prices dropped for American farm products. Thegovernment did not help farmers, and many lost their farms.Weak industries Older industries such as iron, railroads, mining, and textiles did notshare in the general prosperity.International economic problems-The United States kept tariffs high on foreigngoods to protect U.S. industries. However, if foreign countries could not sell goods inthe United States, they could not afford to buy U.S. exports or to payback loans. Ddebt.How did high U.S. tariffs affect theeconomy during the 1920s?A Factories increased production to keepup with the demand for U.S. exports.B Foreign countries could not afford tobuy U.S. exports or repay U.S. loans.C Prices for U.S. goods were kept high,so fewer people could afford to buythem.D U.S. companies fought tariffs becausethey believed in open markets.

At the start of World War I, the US economy faced a recession. However, it experienced a boom, as…

debt. How did high U.S. tariffs affect the economy during the 1920s? B A Factories increased production to keep up with the demand for U.S. exports. Foreign countries could not afford to buy U.S. exports or repay U.S. loans. Prices for U.S. goods were kept high, so fewer people could afford to buy C them. D U.S. companies fought tariffs because they believed in open markets.

debt. How did high U.S. tariffs affect the economy during the 1920s? B A Factories increased production to keep up with the demand for U.S. exports. Foreign countries could not afford to buy U.S. exports or repay U.S. loans. Prices for U.S. goods were kept high, so fewer people could afford to buy C them. D U.S. companies fought tariffs because they believed in open markets.