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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. The author made what sports analogy to describe the problems with the banking system?
(a) Using a golf analogy, the problems with the banking system were presented in a fairly understandable way.
(b) Using a football analogy, the problems with the banking system were presented in a fairly understandable way.
(c) Using a baseball analogy, the problems with the banking system were presented in a fairly understandable way.
(d) Using a soccer analogy, the problems with the banking system were presented in a fairly understandable way.

2. The banking system before the Federal Reserve System allowed banks to lend out what percentage of money against one percent in deposits.
(a) The banking system before the Federal Reserve System allowed banks to lend out more money than they held in deposits, up to sixty percent loaned out with only one percent in deposits.
(b) The banking system before the Federal Reserve System allowed banks to lend out more money than they held in deposits, up to twenty percent loaned out with only one percent in deposits.
(c) The banking system before the Federal Reserve System allowed banks to lend out more money than they held in deposits, up to ninety-nine percent loaned out with only one percent in deposits.
(d) The banking system before the Federal Reserve System allowed banks to lend out more money than they held in deposits, up to fithy percent loaned out with only one percent in deposits.

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

4. 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 gave the banks more money.
(b) If the debtors stopped paying altogether, the Federal Reserve System fined them.
(c) If the debtors stopped paying altogether, the Federal Reserve System refused to back the bad debt.
(d) If the debtors stopped paying altogether, the Federal Reserve System filed suit in Federal Court.

5. 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 was controlled by outside political interests that fostered fraud.
(d) The Federal Reserve tried to institute European standards which led to the perpetuation of fraud.

Short Answer Questions

1. What happened when a debtor defaulted on a loan?

2. What was the location of the meeting where the concept of the Federal Reserve was developed?

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

4. What does the FDIC stand for?

5. In what year was the concept of the Federal Reserve first developed?

(see the answer key)

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