Question

What impacts did the decentralization of the U.S. banking system during the free banking era have on the currency in the United States? Select the two correct answers.

A. The purchasing power of currencies issued by state banks varied wildly from state to state.

B. Monetary reserves decreased.

C. The money supply declined.

D. The amount of loanable funds increased.

E. Land was frequently purchased with counterfeit currency.

Answer 1

A and D.

- A: Yes — many state banknotes circulated at discounts and their purchasing power varied by bank and location.
- D: Yes — easier chartering and note issuance expanded credit provision and increased available loanable funds.