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This quiz consists of 5 multiple choice and 5 short answer questions through Section I. What Creature Is This? Chapter 4 Home Sweet Loan.

Multiple Choice Questions

1. What risky loan activities have banks participated in?
(a) Banks loaned depositors' money out to to the US government in times of economic downturns.
(b) Banks loaned depositors' money out to poor people during the Great Depression.
(c) Banks loaned depositors' money to foreign governments who refused to repay the loans.
(d) Banks loaned depositors' money out to risky debtors who would likely not be able to pay the loans off.

2. If the debtors stopped paying banks altogether, what action would the Federal Reserve System take?
(a) If the debtors stopped paying altogether, the Federal Reserve System refused to back the bad debt.
(b) If the debtors stopped paying altogether, the Federal Reserve System fined them.
(c) If the debtors stopped paying altogether, the Federal Reserve System filed suit in Federal Court.
(d) If the debtors stopped paying altogether, the Federal Reserve System gave the banks more money.

3. How is the Federal Reserve System reviewed in general?
(a) The Federal Reserve System had become the nation's first source of lending.
(b) The Federal Reserve System had become known to have the strictest lending standards.
(c) The Federal Reserve System had become the lender of last resort.
(d) The Federal Reserve System had become the economic leader of the country.

4. What did the Federal Reserve System help banks to do?
(a) The Federal Reserve helped banks by making special laws for them.
(b) The Federal Reserve helped banks keep individuals, businesses and entire countries perpetually in debt and working mostly for the banks.
(c) The Federal Reserve helped banks to stay in operation.
(d) The Federal Reserve helped banks keep a healthy cash flow.

5. 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 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.
(c) A currency drain occurs when foreign investors withdrawn their funds from US banks.
(d) A currency drain occurs when the government devalues the currency system.

Short Answer Questions

1. The nationalization of banks has occurred during conservative or liberal administrations?

2. When the entire banking system failed, what did the Federal government turn to to bolster the failed back up system?

3. Who was the mastermind behind the Federal Reserve?

4. Why was the "Federal Reserve System," so named?

5. What important aspect about the economic history of the country did the author fail to mention?

(see the answer key)

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