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

2. Why was the "Federal Reserve System," so named?
(a) The "Federal Reserve System" was so named so that people would think it was part of the Federal government.
(b) The "Federal Reserve System" was so named so that people would know that it was part of the Federal government.
(c) The "Federal Reserve System" was so named because its offices were not state run.
(d) The "Federal Reserve System" was so named so that people would have respect for it.

3. What has caused the economy's boom-bust cycle?
(a) The Federal Reserve's advertised purpose was to stabilize the economy, but depressions and recessions have resulted instead in a boom-bust cycle.
(b) The economy's boom-bust cycle is caused by the instability of the International Monetary Fund.
(c) The economy's boom-bust cycle is caused from trade deficits.
(d) The economy's boom-bust cycle is caused from people hoarding cash.

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

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 increases 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.

Short Answer Questions

1. Many people feel that the economic system has been rigged to favor what group of people?

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

3. The author made what sports analogy to describe the problems with the banking system?

4. This conspiracy theory about the Federal Reserve pointed the finger at the meeting on Jekyll Island that occurred in 1910.

5. How did many people feel about those who went too far into debt?

(see the answer key)

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