|Name: _________________________||Period: ___________________|
This quiz consists of 5 multiple choice and 5 short answer questions through Section I. What Creature Is This? Chapter 2 The Name of the Game Is Bailout.
Multiple Choice Questions
1. Why did banks make risky loans?
(a) The banks had incentive in terms of high profits for granting mortgages to home buyers who would not be able to pay the loans off, but who might be able to make interest payments.
(b) Banks did not thoroughly check out the risk factor of some borrowers.
(c) The US Congress passed legislation that required banks to make ten percent of their loans to risky borrowers.
(d) Banks are required by the Federal Reserve to make a certain percentage of risky loans.
2. Who was the mastermind behind the Federal Reserve?
(a) Paul Moritz Warburg was the mastermind behind the Federal Reserve.
(b) Thomas Jefferson was the mastermind behind the Federal Reserve.
(c) Henry Kissinger was the mastermind behind the Federal Reserve.
(d) Alexander Hamilton was the mastermind behind the Federal Reserve.
3. What risky loan activities have banks participated in?
(a) Banks loaned depositors' money to foreign governments who refused to repay the loans.
(b) Banks loaned depositors' money out to risky debtors who would likely not be able to pay the loans off.
(c) Banks loaned depositors' money out to to the US government in times of economic downturns.
(d) Banks loaned depositors' money out to poor people during the Great Depression.
4. What is the definition of a public run on a bank?
(a) A public run occurs when the Federal government takes ownership of a bank.
(b) A public run occurs when a bank runs out of cash.
(c) A public run is when the government puts a bank up for sale.
(d) A public run was when many depositors demanded their cash from a bank and wiped out the bank's reserves.
5. What happened when a debtor defaulted on a loan?
(a) When a debtor defaulted on a loan, he would ask loan payments be waived.
(b) When a debtor defaulted on a loan, he would ask the government for a guaranteed loan.
(c) When a debtor defaulted on a loan, he would stop making payments.
(d) When a debtor defaulted on a loan, he would first ask for more time to pay.
Short Answer Questions
1. Many people feel that the economic system has been rigged to favor what group of people?
2. What did the U.S. government do to support banks?
3. This conspiracy theory about the Federal Reserve pointed the finger at the meeting on Jekyll Island that occurred in 1910.
4. How does a currency drain occur within the banking system?
5. What happens when the Federal Reserve System prints new money?
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