Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
How did the Federal Reserve let the banking system collapse in the 1930's Great Depression? Did The Fed get things right in our 2008 crisis and since then?
Expert Solution
Step 1
The primary activity of fed is to maintain a required reserve fund from all the banks. In the case of crisis, this fund will be utilized to support the customers and their savings.
Step 2
In 1930, the fed did not maintain the federal reserve and hence, did not support the banks and customer savings. In addition to this, fed increased the interest rate.
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