What did the Federal Reserve Act of 1913 establish?

The Federal Reserve Act of 1913 established a central banking system in the United States, known as the Federal Reserve System. This act was a response to the need for a more reliable and stable banking system, as the country experienced financial panics in the early 20th century. The Federal Reserve was designed to provide the nation with a safer and more flexible monetary and financial system.

The system consists of 12 regional Federal Reserve Banks and a Board of Governors, which implement monetary policy aimed at stabilizing the economy by regulating the money supply and interest rates. This central banking structure allows for a coordinated response to economic challenges and helps manage inflation and employment.

Understanding the central banking system's role is crucial, as it is foundational to current monetary policy and economic stability in the U.S. The other options, such as state banks, federal loan agencies, and national credit unions, do not accurately represent the primary purpose and function of the Federal Reserve Act, highlighting the importance of the central banking system established by this landmark legislation.