1913 Federal Reserve Act

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DEFINITION of '1913 Federal Reserve Act'

The 1913 U.S. legislation that created the current Federal Reserve System. The Federal Reserve Act intended to establish a form of economic stability through the introduction of the Central Bank, which would be in charge of monetary policy, into the United States. The Federal Reserve Act is perhaps one of the most influential laws concerning the U.S. financial system.

BREAKING DOWN '1913 Federal Reserve Act'

Prior to 1913, panics were common occurrences, as investors were unsure about the safety of their deposits. The Federal Reserve Act gave the 12 Federal Reserve banks the ability to print money in order to ensure economic stability. In addition to this task, the Fed had the power to adjust the discount rate/the fed funds rate and buy & sell U.S. treasuries.

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RELATED FAQS
  1. Who determines the reserve ratio?

    The Federal Reserve of the United States of America is the regulatory entity that determines the reserve ratio, and therefore ... Read Full Answer >>
  2. How is the Federal Reserve audited?

    Contrary to conventional wisdom, the Federal Reserve is extensively audited. Politicians on the left and right of a populist ... Read Full Answer >>
  3. Who decides when to print money in the US?

    The U.S. Treasury decides to print money in the United States as it owns and operates printing presses. However, the Federal ... Read Full Answer >>
  4. Why do some people claim the Federal Reserve is unconstitutional?

    The U.S. Constitution does not mention the need for a central bank, nor does it explicitly grant the government the power ... Read Full Answer >>
  5. How can the federal reserve increase aggregate demand?

    The Federal Reserve can increase aggregate demand in indirect ways by lowering interest rates. Aggregate demand is a measure ... Read Full Answer >>
  6. How does the stock market react to changes in the Federal Funds Rate?

    The stock market reacts to changes in the federal funds rate in various ways depending on where it is in the business cycle. ... Read Full Answer >>

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