Chapter 14: Problem 2

Which statement is true? (LOI) a) The United States has always had a central bank. b) The United States has never had a central bank. c) The United States had a central bank until 1913 . d) The United States has had a central bank since 1913.

Short Answer

Expert verified

The correct answer is d) The United States has had a central bank since 1913, with the establishment of the Federal Reserve System.

Step by step solution

Understanding the historical background of US banking system

The United States central banking system has evolved over time. By understanding the historical context, the student will be able to identify the right statement.

Evaluate Option a) The United States has always had a central bank

This claim is inaccurate because the United States has not always had a central bank. The country was formed in 1776, while the First Bank of the United States (considered by some as the nation's first central bank), was established only in 1791.

Evaluate Option b) The United States has never had a central bank

This statement is also false. The United States has indeed had a central bank at different points in its history. After the First Bank of the United States, the Second Bank of the United States was established in 1816. Currently, the Federal Reserve System (created in 1913) functions as the country's central banking system.

Evaluate Option c) The United States had a central bank until 1913

This claim is not correct. Prior to 1913, the United States did not have a central bank, because the Second Bank of the United States' charter expired in 1836. From 1837 until the establishment of the Federal Reserve System in 1913, the United States operated without a central bank.

Evaluate Option d) The United States has had a central bank since 1913

This statement is true. The Federal Reserve Act was signed into law on December 23, 1913, creating the Federal Reserve System as the central banking system of the United States. Since then, the United States has continuously had a central bank.

Conclusion

After evaluating each option based on historical facts, the correct answer to the question "Which statement is true?" is "d) The United States has had a central bank since 1913."

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