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 offer debtors more credit?
(a) Banks offered more credit to debtors to help improve their credit rating.
(b) Banks offered more credit to debtors to help them purchase homes.
(c) Banks offered more credit to debtors to so they could increase their purchasing power.
(d) Banks offered more credit to debtors to increase interest payments to the them.

2. The Federal Reserve System was designed to control what element of member banks?
(a) The Federal Reserve System was designed to control a bank's ability to make loans.
(b) The Federal Reserve System was designed to control how much reserve cash a bank can invest in its expansion.
(c) The Federal Reserve System was designed to control a bank's cash flow.
(d) The Federal Reserve System was designed to control how much reserve cash any member bank had to keep on hand.

3. What happens when the Federal Reserve System prints new money?
(a) When the Federal Reserve System creates new money, it increases the value of the money already in the system.
(b) When the Federal Reserve System creates new money, it dilutes the value of the money already in the system.
(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 improves the overall economy.

4. Why has bank fraud never been eliminated?
(a) Financial experts were taught that the way banking worked in the US was the only way it could work, and so the fraud kept on going.
(b) The Federal Reserve was influenced by lobbyists who advocated fraudulent regulations.
(c) The Federal Reserve tried to institute European standards which led to the perpetuation of fraud.
(d) The Federal Reserve was controlled by outside political interests that fostered fraud.

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