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

Multiple Choice Questions

1. What is the main transport of both Amtrak and Conrail?
(a) Amtrak is the main carrier for government cargo and Conrail is available to the general public.
(b) Amtrak had been the passenger side of Penn Central, while Conrail had been the freight side.
(c) Amtrak had been the freight side of Penn Central, while Conrail had been the passenger side.
(d) Amtrak operates as a commuter train while Conrail operates as a long-distance carrier.

2. What importance does political ideology have on the nationalization of banks?
(a) Liberal ideologues have the great influence on bank legislation.
(b) The Congressional chairman of the Banking Committee influences support for nationalization.
(c) The nationalization of banks is such a strong part of the overall economy that political ideology did not matter.
(d) Political lobbyists for banks have great influence on their nationalization.

3. How did the banks make their money?
(a) The banks made money on their cash flow.
(b) The banks made money on interest, not principle, payments.
(c) The banks made money on principle, not on interest payments.
(d) The banks made money on both interest ad principle payments.

4. How did unemployment impact the economic problems?
(a) High employment distracted people from looking for homes.
(b) The Federal government was distracted from economic problems and focused their attention on the unemployed.
(c) High unemployment compounded this problem, forcing people into foreclosures and drying up the housing market.
(d) High employment made more homes available for sale.

5. How did poor regulation contribute to the Savings and Loan crisis of the 1980s?
(a) Government regulations allowed S&Ls did not require them to repay their debtors in full.
(b) 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.
(c) Government regulations allowed S&Ls to hoard money to increase their cash flow.
(d) Government regulations allowed S&Ls to file individual bankruptcies.

6. What resulted when paper money was not backed with gold or silver?
(a) Money not backed by precious metal led to deflation and political upheaval.
(b) Money not backed by precious metal led to booming economies and political stability.
(c) Money not backed by precious metal led to higher deficits.
(d) Money not backed by precious metal led to inflation and political upheaval.

7. 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 fithy 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 sixty 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 twenty 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 ninety-nine percent loaned out with only one percent in deposits.

8. Why did banks make risky loans?
(a) Banks did not thoroughly check out the risk factor of some borrowers.
(b) Banks are required by the Federal Reserve to make a certain percentage of risky loans.
(c) The banks had incentive in terms of high profits for granting mortgages to home buyers who would not be able to pay the loans off, but who might be able to make interest payments.
(d) The US Congress passed legislation that required banks to make ten percent of their loans to risky borrowers.

9. Who was the mastermind behind the Federal Reserve?
(a) Paul Moritz Warburg was the mastermind behind the Federal Reserve.
(b) Thomas Jefferson was the mastermind behind the Federal Reserve.
(c) Alexander Hamilton was the mastermind behind the Federal Reserve.
(d) Henry Kissinger was the mastermind behind the Federal Reserve.

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

11. What happens when the Federal Reserve System prints new money?
(a) When the Federal Reserve System creates new money, it improves the overall economy.
(b) When the Federal Reserve System creates new money, it causes the stock market to rally.
(c) When the Federal Reserve System creates new money, it increases the value of the money already in the system.
(d) When the Federal Reserve System creates new money, it dilutes the value of the money already in the system.

12. 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) The Great Depression proved to be an unbearable strain on the banking system.
(d) There were public runs on the banks and currency drains from other banks demanding payments.

13. What U.S. president removed the gold standard from the US dollar?
(a) President Wilson took the U.S. dollar off its gold backing so that dollars could not be redeemed for gold.
(b) President Nixon took the U.S. dollar off its gold backing so that dollars could not be redeemed for gold.
(c) President Lincoln took the U.S. dollar off its gold backing so that dollars could not be redeemed for gold.
(d) President Kennedy took the U.S. dollar off its gold backing so that dollars could not be redeemed for gold.

14. Why was platinum not used to back the monetary system?
(a) Platinum was too scarce to be used to be the standard for a monetary system.
(b) There were myths about platinum and many questioned its real value making it unacceptable to be used to be the standard for a monetary system.
(c) Not enough platinum occurred in the United States to be used as the standard for a monetary system.
(d) Platinum did not have the popular support of the public to become the standard for a monetary system.

15. What countries did the author point to as failures of the IMF and World Bank?
(a) The author used The Sudan, China, Pakistan and Afghanistan as examples of IMF and World Bank failures.
(b) The author used Greece, Ireland, Italy and Kirghistan as examples of IMF and World Bank failures.
(c) The author used Venezuela, Chili, Cuba and Uraguay as examples of IMF and World Bank failures.
(d) The author used Tanzania, Argentina, Brazil and Mexico as examples of IMF and World Bank failures.

Short Answer Questions

1. How were the policies of FDR's administration a departure from capitalism?

2. What is laudable about the author's work?

3. What events cause deflation?

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

5. When the entire banking system failed, what did the Federal government turn to to bolster the failed back up system?

(see the answer keys)

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