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This quiz consists of 5 multiple choice and 5 short answer questions through Section I. What Creature Is This? Chapter 3 Protectors of the Public.

Multiple Choice Questions

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

2. What type of person was Paul Moritz Warburg?
(a) Paul Moritz Warburg was a stubborn man concerned only with the wealth of the upper class.
(b) Paul Moritz Warburg was a mild-mannered, shy and sensitive man.
(c) Paul Moritz Warburg was a rude and greedy man.
(d) Paul Moritz Warburg was an elitist who was not concerned with the concerns of the poor.

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

4. What was the main argument in favor of nationalizing banks?
(a) The fundamental argument in favor of the nationalization was that such bailouts would be allowed only once.
(b) The fundamental argument in favor of the nationalization was that the system had to be purged of risk-taking bank executives.
(c) The fundamental argument in favor of the nationalization was that the system was so broken that it simply could not be regulated enough to work without eventually nationalizing all banking and industry.
(d) The fundamental argument in favor of the nationalization was that a weak economy would recover more quickly.

5. What was the main cause of the economic meltdown in 2008?
(a) The lack of Congressional legislation was the main cause for the 2008 economic meltdown.
(b) Toxic assets, also known as mortgages and loans were the main cause for the 2008 economic meltdown.
(c) An unstable world economy was the main cause for the 2008 economic meltdown.
(d) The US deficit was the main cause for the 2008 economic meltdown.

Short Answer Questions

1. Why did banks make risky loans?

2. What did the Federal Reserve System help banks to do?

3. How did the banks make their money?

4. Who does the Federal Reserve depend on to bail out the country in times of economic collapse?

5. In what year was First Pennsylvania Bank bailed out?

(see the answer key)

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