Question

Economist Richard Sylla of New York University has argued that in the 1790s, Secretary of the Treasury Alexander Hamilton "established the financial foundations that would make the United States the most successful emerging market in the nineteenth century, and the economic colossus of the next that some would call the 'American century." Source: Richard Sylla, “Financial Foundations: Public Credit, the National Bank, and Securities Markets,” in Douglas A. Irwin and Richard Sylla, eds., Founding Choices: American Economic Policy in the 1790s, Chicago: University of Chicago Press, 2011, p. 86. Sylla would focus on all of the following “financial foundations” of the United States, except: A. Investor confidence in the credit of the United States. B. The issuance of currency. OC. The establishment of a central bank. D. The creation of stock and bond markets. All of the following are reasons why these financial foundations were important in making possible the rapid growth of the U.S. economy during the nineteenth and twentieth centuries, except: A. Once financial markets were organized, they provided corporations with a way to raise funds and investors with a way to participate in the growth of the economy. OB. A central bank made loans more widely available to businesses and inspired state governments to allow other private banks to be established. O C. A central bank provided direct control over all interest rates, facilitating the control and direction of the overall economy. D. The financial system provided a way for funds to flow from savers to entrepreneurs establishing and expanding new businesses.

Answer 1

(1) (B)

Issuing of currency is not a financial foundation, since this existed before establishment of financial foundations.

(2) (C)

Central bank's control over interest rate is a restrictive policy that hinders borrowers' access to the fund provided by savers.