The Creature from Jekyll Island: A Second Look at the Federal Reserve Test | Mid-Book Test - Easy

G. Edward Griffin
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This test consists of 15 multiple choice questions and 5 short answer questions.

Multiple Choice Questions

1. How did the development of paper money begin?
(a) The development of paper money started out as simply receipts issued by goldsmiths who kept other people's gold coins in their vaults.
(b) The development of paper money started out as simply receipts issued by goldsmiths who gave the people's gold coins to the government.
(c) The development of paper money started out as vouchers issued by the government.
(d) The development of paper money started out as simply receipts issued by goldsmiths who were the first banks.

2. Conspiracy theorists connected the potential of world socialism to what organization?
(a) This conspiracy theory encompassed the entire world by connecting the IMF with socialism.
(b) This conspiracy theory encompassed the entire world by connecting the World Bank with socialism.
(c) This conspiracy theory encompassed the entire world by connecting the Federal Reserve with socialism.
(d) This conspiracy theory encompassed the entire world by connecting the United Nations with socialism.

3. How were the policies of FDR's administration a departure from capitalism?
(a) They abandoned Congressional banking regulations that were supposed to have worked with a purely capitalistic system.
(b) They abandoned standards of the Federal Reserve that were supposed to have worked with a purely capitalistic system.
(c) They abandoned the principles of the International Monetary Fund that were supposed to have worked with a purely capitalistic system.
(d) They abandoned the free market principles that were supposed to have worked with a purely capitalistic system.

4. When were the International Monetary Fund and World Bank established?
(a) The World Bank and International Monetary Fund were established during the Cold War.
(b) The World Bank and International Monetary Fund were established in 1910 at Jekyll Island.
(c) In 1944, the Bretton Woods Conference took place, out of which came the International Monetary Fund or IMF and World Bank
(d) The World Bank and International Monetary Fund were established in 1929 when the Stock Market crashed.

5. How did the banks make their money?
(a) The banks made money on principle, not on interest payments.
(b) The banks made money on their cash flow.
(c) The banks made money on interest, not principle, payments.
(d) The banks made money on both interest ad principle payments.

6. How did the government provide economic support to Lockheed Corporation in 1970?
(a) In 1970, Lockheed Corporation was made a unit of the Defense Department.
(b) In 1970, Lockheed Corporation was forgiven of all defense-related debt.
(c) In 1970, the US government agreed to pay Lockheed Corporation twenty-percent over their selling prices.
(d) In 1970, Lockheed Corporation had troubles and became a prime government contractor, another way of nationalizing private industry.

7. How does a currency drain occur within the banking system?
(a) A currency drain occurs when the Federal government demands repayment of loans.
(b) A currency drain occurs when the government devalues the currency system.
(c) A currency drain occurs when foreign investors withdrawn their funds from US banks.
(d) A currency drain happened when many depositors wrote checks, and the receivers of the checks cashed them at another bank, thereby requiring more money from the first bank than it had on hand.

8. What occurred when coinage was weakened through lower percentages of precious metal or completing stripped of such backing?
(a) Paper money was seen to be the superior monetary system when the coinage was debased through lower percentages of precious metal or none at all.
(b) Inflation and political turmoil occurred when the coinage was debased through lower percentages of precious metal or none at all.
(c) Deflation resulted when the coinage was debased through lower percentages of precious metal or none at all.
(d) Stock market instability occurred when the coinage was debased through lower percentages of precious metal or none at all.

9. What may have contributed to the problems of the S&Ls in the 1980s?
(a) Inflation was in the double-digits and real estate prices were going up rapidly.
(b) Inflation was in the double-digits and real estate prices were going rapidly decreasing.
(c) Inflation was steady but the deficit was rapidly growing.
(d) Deflation was in the double-digits and real estate prices were going up rapidly.

10. Since its inception in 1910, the Federal Reserve had made what decisions about bank bailouts?
(a) Since its inception in 1910, the Federal Reserve had decided that medium-sized banks would get the majority of bailouts.
(b) Since its inception in 1910, the Federal Reserve had decided that large banks would get bailouts, medium-sized banks would get some bailouts, and small banks would be left to fail or be acquired by larger banks.
(c) Since its inception in 1910, the Federal Reserve had decided that large banks would be the only banks to get bailouts.
(d) Since its inception in 1910, the Federal Reserve had decided that large banks would get bailouts only if they could prove they had complied with all regulations.

11. How did the Federal Reserve System accomplish the nationalization of banks?
(a) The politics of the Federal Reserve System became new and inventive ways to justify the nationalization of banks through the use of bailouts.
(b) The politics of the Federal Reserve System became new and inventive ways to justify the nationalization of banks through the use of short-term loans.
(c) The politics of the Federal Reserve System became new and inventive ways to justify the nationalization of banks through the use of risky loans.
(d) The politics of the Federal Reserve System became new and inventive ways to justify the nationalization of banks through the use of new legislation.

12. What happened when a debtor defaulted on a loan?
(a) When a debtor defaulted on a loan, he would stop making payments.
(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 first ask for more time to pay.
(d) When a debtor defaulted on a loan, he would ask loan payments be waived.

13. What new way of home ownership emerged in the 1980s?
(a) Condominiums became a new way to buy a home.
(b) A government sponsored home buyer's savings program was established.
(c) The government incentivized buyers to buy foreclosed upon homes.
(d) Housing co-ops became another way to buy a home.

14. What events cause deflation?
(a) Deflation occurs when prices suddenly tumble.
(b) Deflation occurs when prices suddenly increase.
(c) Deflation occurs when the stock market suddenly tumble.
(d) Deflation occurs when the government takes steps against inflationary signals.

15. What do many people feel was the real reason behind the establishment of the Federal Reserve?
(a) Many feel that the real reason for creating the Federal Reserve was to keep poor people from turning to crime.
(b) Many feel that the real reason for creating the Federal Reserve was to keep the rich from becoming too powerful.
(c) Many feel that the real reason for creating the Federal Reserve was to keep the middle class from failing.
(d) Many feel that the real reason for creating the Federal Reserve was to keep rich people in power.

Short Answer Questions

1. Why was there skepticism about the author's analysis?

2. Why did banks make risky loans?

3. What country contributed the largest investment in the IMF?

4. What culture was the first to create a currency system based on gold and silver?

5. What caused the economy to get into such a state that the government was compelled to bail out banks?

(see the answer keys)

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