"An Act To provide for the establishment of Federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes." — Federal Reserve Act (1913), Preamble
An "elastic currency" was meant to allow the money supply to
- Acheck_circle
expand and contract with the seasonal and cyclical needs of business
- B
remain pegged to the price of silver indefinitely
- C
be issued solely by state-chartered banks
- D
vary only with congressional appropriation
Explanation
Before the Fed, the national bank-note supply was inelastic and tied to government bonds; the Act gave regional reserve banks the power to expand credit when commerce required it.