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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. What do many people feel was the real reason behind the establishment of the Federal Reserve?
(a) Many feel that the real reason for creating the Federal Reserve was to keep the rich from becoming too powerful.
(b) Many feel that the real reason for creating the Federal Reserve was to keep the middle class from failing.
(c) Many feel that the real reason for creating the Federal Reserve was to keep rich people in power.
(d) Many feel that the real reason for creating the Federal Reserve was to keep poor people from turning to crime.

2. How does a currency drain occur within the banking system?
(a) A currency drain happened when many depositors wrote checks, and the receivers of the checks cashed them at another bank, thereby requiring more money from the first bank than it had on hand.
(b) A currency drain occurs when foreign investors withdrawn their funds from US banks.
(c) A currency drain occurs when the Federal government demands repayment of loans.
(d) A currency drain occurs when the government devalues the currency system.

3. What did the Federal Reserve System help banks to do?
(a) The Federal Reserve helped banks to stay in operation.
(b) The Federal Reserve helped banks keep a healthy cash flow.
(c) The Federal Reserve helped banks keep individuals, businesses and entire countries perpetually in debt and working mostly for the banks.
(d) The Federal Reserve helped banks by making special laws for them.

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

5. What economic group is hit the hardest by an inflation?
(a) Inflation has been a problem for the rich and poor alike, although it hit the chronically poor harder than anyone.
(b) Only the very wealthiest people are hurt by inflation.
(c) Inflation damages only the very poor in a society.
(d) Only the middle class is hurt by inflation.

Short Answer Questions

1. What resulted from the 1970 Penn Central Railroad bailout?

2. What was the main argument in favor of nationalizing banks?

3. How was the nationalization of banks justified?

4. Why did banks offer debtors more credit?

5. What is the main transport of both Amtrak and Conrail?

(see the answer key)

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