Which act was designed to restore confidence in the banking system and restricted investing of deposits in the stock market?

• A. Abolish the Federal Reserve.
• B. Privatize all banks.
• C. Restore confidence in the banking system; prevent banks from investing savings deposits in the stock market.
• D. Expand the stock market.

Answer: (C)

The key idea is the 1933 Glass-Steagall Act, which aimed to restore confidence in the banking system by reforming how banks operated and by limiting deposit usage. It required a separation between commercial banking (the everyday banking people rely on for deposits and loans) and investment banking (speculating in the stock market), so savings deposits could not be used for stock investments. This separation, along with the broader move to reassure savers about the safety of their funds, helped rebuild trust after the Great Depression. The other options wouldn’t achieve this combination of restoring trust and curbing deposit investments: abolishing the Federal Reserve would remove important stabilization, privatizing all banks would remove public safeguards, and expanding the stock market would increase exposure of deposits to market risk.