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

2. What does the FDIC stand for?
(a) The FDIC stands for The First Depositor's Insurance Corporation.
(b) The FDIC stands for The First Debt Institute of Connneticut.
(c) The FDIC stands for The Federal Debt Issuers Company.
(d) The FDIC stands for The Federal Deposit Insurance Corporation.

3. How did unemployment impact the economic problems?
(a) High employment distracted people from looking for homes.
(b) The Federal government was distracted from economic problems and focused their attention on the unemployed.
(c) High unemployment compounded this problem, forcing people into foreclosures and drying up the housing market.
(d) High employment made more homes available for sale.

4. Who was the mastermind behind the Federal Reserve?
(a) Henry Kissinger was the mastermind behind the Federal Reserve.
(b) Paul Moritz Warburg was the mastermind behind the Federal Reserve.
(c) Thomas Jefferson was the mastermind behind the Federal Reserve.
(d) Alexander Hamilton was the mastermind behind the Federal Reserve.

5. What happens when the Federal Reserve System prints new money?
(a) When the Federal Reserve System creates new money, it dilutes the value of the money already in the system.
(b) When the Federal Reserve System creates new money, it improves the overall economy.
(c) When the Federal Reserve System creates new money, it causes the stock market to rally.
(d) When the Federal Reserve System creates new money, it increases the value of the money already in the system.

Short Answer Questions

1. What risky loan activities have banks participated in?

2. What was the impact of the creation of new money on the currency?

3. What economic group is hit the hardest by an inflation?

4. What is the definition of a public run on a bank?

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

(see the answer key)

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