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This test consists of 15 multiple choice questions and 5 short answer questions.

Multiple Choice Questions

1. In what year was the concept of the Federal Reserve first developed?
(a) The concept of the Federal Reserve was developed in 1910?
(b) The concept of the Federal Reserve was developed in 1966.
(c) The concept of the Federal Reserve was developed in 1952.
(d) The concept of the Federal Reserve was developed in 1920.

2. Why was there skepticism about the author's analysis?
(a) The author was found to be a lobbyist for conservative causes.
(b) The author refused to be questioned about his research.
(c) The author was not considered an expert on the subject.
(d) Doubt existed because the author's entire analysis was an exercise in historical analysis from subsequent events, which is by nature flawed due to the guesswork involved.

3. What is the Fabian plan?
(a) The Fabian plan had to do with making the world one big democracy.
(b) The Fabian plan had to do with making the world a world without political .
(c) The Fabian plan had to do with making the world one big socialized government.
(d) The Fabian plan involved making the entire world a capitalistic society.

4. How did poor regulation contribute to the Savings and Loan crisis of the 1980s?
(a) Government regulations allowed S&Ls to hoard money to increase their cash flow.
(b) Government regulations allowed S&Ls did not require them to repay their debtors in full.
(c) Government regulations allowed S&Ls to file individual bankruptcies.
(d) Government regulations allowed S&Ls to claim assets that had no value, such as community good will toward them, and encouraged bad lending practices to increase home ownership.

5. 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 the government devalues the currency system.
(c) A currency drain occurs when foreign investors withdrawn their funds from US banks.
(d) A currency drain occurs when the Federal government demands repayment of loans.

6. Prior to the establishment of the Federal Reserves, what caused massive bank failures?
(a) US bonds were devalued by the Federal authorities.
(b) Foreign debtors demanded the full repayment of loands.
(c) There were public runs on the banks and currency drains from other banks demanding payments.
(d) The Great Depression proved to be an unbearable strain on the banking system.

7. In what year was First Pennsylvania Bank bailed out?
(a) First Pennsylvania Bank was bailed out in 1980.
(b) First Pennsylvania Bank was bailed out in 1973.
(c) First Pennsylvania Bank was bailed out in 1975.
(d) First Pennsylvania Bank was bailed out in 1972.

8. How open to questioning were the original participants of the 1910 meeting?
(a) Most of the participants at the 1910 meeting openly talked about the establishment of the Federal Reserve in interviews conducted years later.
(b) None of the participants at the 1910 meeting talked about the establishment of the Federal Reserve in interviews conducted years later.
(c) The participants at the 1910 meeting would only agree to talk about the establishment of the Federal Reserve with the New York Times.
(d) Only some of the participants at the 1910 meeting talked about the establishment of the Federal Reserve in interviews conducted years later.

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

10. This conspiracy theory about the Federal Reserve pointed the finger at the meeting on Jekyll Island that occurred in 1910.
(a) The conspiracy theory surrounding the Federal Reserve was thought to have originated at the 1904 World's Fair.
(b) The conspiracy theory surrounding the Federal Reserve was thought to be hatched at the 1910 Jekyll Island meeting.
(c) The conspiracy theory surrounding the Federal Reserve was thought to have originated during FDR's administration.
(d) The conspiracy theory surrounding the Federal Reserve was thought to have originated during the Great Depression.

11. Conspiracy theorists connected the potential of world socialism to what organization?
(a) This conspiracy theory encompassed the entire world by connecting the Federal Reserve with socialism.
(b) This conspiracy theory encompassed the entire world by connecting the United Nations with socialism.
(c) This conspiracy theory encompassed the entire world by connecting the World Bank with socialism.
(d) This conspiracy theory encompassed the entire world by connecting the IMF with socialism.

12. During the history of the world, what types of things were first traded?
(a) During the history of money development, trade started out with bartering commodities, cows traded for grain and so on.
(b) During the history of money development, the first currency system was based on grain and livestock.
(c) During the history of money development, trade started out between neighboring communities.
(d) During the history of money development, trade started out with a rudimentary currency system.

13. When the entire banking system failed, what did the Federal government turn to to bolster the failed back up system?
(a) When the whole banking system collapsed, taxpayer money went into bolstering the failed system back up.
(b) When the whole banking system collapsed, the debt ceiling was raised to bolster the failed system back up.
(c) When the whole banking system collapsed, money from newly issued government bonds went into bolstering the failed system back up.
(d) When the whole banking system collapsed, foreign investments went into bolstering the failed system back up.

14. What may have contributed to the problems of the S&Ls in the 1980s?
(a) Inflation was in the double-digits and real estate prices were going rapidly decreasing.
(b) Inflation was steady but the deficit was rapidly growing.
(c) Inflation was in the double-digits and real estate prices were going up rapidly.
(d) Deflation was in the double-digits and real estate prices were going up rapidly.

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

Short Answer Questions

1. What did the author argue resulted from the establishment of the IMF and World Bank and the abandonment of the gold standard?

2. What is the status of a loan that is "underwater?"

3. Why was housing becoming difficult to obtain in the 1980s?

4. If the debtors stopped paying banks altogether, what action would the Federal Reserve System take?

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

(see the answer keys)

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