The Federal Reserve banks could probably have prevented many of the bank failures in the early 1930s by:

A) raising the reserve requirement of the commercial banks.
B) lending money to the commercial banks.
C) improving the system whereby checks are cleared.
D) helping to create a commission of experts to engage in a prolonged study of the problem.
E) selling large amounts of government bonds.

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Carolyn Eakers-Jarrett · Accepted Answer

Final Answer : B, Explanation :  By lending money to the commercial banks, the Federal Reserve could have provided liquidity to the banking system, which would have helped prevent bank failures. This was one of the key tools used by the Federal Reserve to address the financial crisis during the Great Depression. Raising the reserve requirement or improving the check clearing system would not have provided immediate relief to banks facing liquidity problems. Creating a commission of experts would have been a longer-term solution, and selling government bonds could have had unintended consequences for the broader economy.

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