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

Multiple Choice Questions

1. What caused the Savings & Loan crisis of the 1980s?
(a) The Savings and Loan or S&L crisis of the 1980s happened because the government tried to insure the deposits, but the funds to do this were not adequate.
(b) The Savings and Loan or S&L crisis of the 1980s happened because the government tried to insure the deposits, but the funds were not made available by Congress.
(c) The Savings and Loan or S&L crisis of the 1980s happened because the government tried to insure the deposits but the president vetoed the legislation that was necessary to carry out the plan.
(d) The Savings and Loan or S&L crisis of the 1980s happened because the government tried to insure the deposits, but the funds were tied up in bank bailouts.

2. 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.

3. What organization ensures the nationalization of banks?
(a) As long as the Congressional Banking Committee existed, it would continue nationalizing banks and perhaps other industries as they fell into financial difficulties.
(b) As long as the Federal Reserve System existed, it would continue nationalizing banks and perhaps other industries as they fell into financial difficulties.
(c) As long as the FDIC existed, it would continue nationalizing banks and perhaps other industries as they fell into financial difficulties.
(d) As long as the International Monetary Fund existed, it would continue nationalizing banks and perhaps other industries as they fell into financial difficulties.

4. How was some property converted for home ownership during the 1980s?
(a) Less expensive condominiums that often times had been rental apartments became another way. Rent-to-buy deals popped into the market.
(b) Some storefront small business buildings were converted to property that was sold for private homes.
(c) In some towns, student housing was converted to property that was sold to homeowners.
(d) Trailer parks were developed as suburban subdivisions.

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

6. What new way of home ownership emerged in the 1980s?
(a) A government sponsored home buyer's savings program was established.
(b) The government incentivized buyers to buy foreclosed upon homes.
(c) Condominiums became a new way to buy a home.
(d) Housing co-ops became another way to buy a home.

7. What problems did the economy of the American Colonies incur?
(a) The American Colonies experienced economic uncertainty due to interference by England.
(b) The American Colonies experienced instability in their economy.
(c) The American Colonies experienced terrible bouts of inflation.
(d) The American Colonies experienced terrible bouts of deflation.

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

9. What is a fractional money system?
(a) A fractional money system is one in which paper money was initially backed by gold but was later diluted when the gold was invested in foreign interests.
(b) A fractional money system is one in which paper money was initially backed by gold but was later diluted with the backing of silver.
(c) A fractional money system is one in which paper money was initially backed by gold but was later diluted as more paper money was printed.
(d) A fractional money system is one in which paper money was initially backed by gold but was later diluted when the gold was devalued.

10. How was the nationalization of banks justified?
(a) Nationalization was necessary for the IMF.
(b) Nationalization was necessary for the public good.
(c) Nationalization was necessary for the banking industry.
(d) Nationalization was necessary for the nation's standing in the world.

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

12. Since its inception in 1910, the Federal Reserve had made what decisions about bank bailouts?
(a) Since its inception in 1910, the Federal Reserve had decided that large banks would get bailouts, medium-sized banks would get some bailouts, and small banks would be left to fail or be acquired by larger banks.
(b) Since its inception in 1910, the Federal Reserve had decided that medium-sized banks would get the majority of bailouts.
(c) Since its inception in 1910, the Federal Reserve had decided that large banks would be the only banks to get bailouts.
(d) Since its inception in 1910, the Federal Reserve had decided that large banks would get bailouts only if they could prove they had complied with all regulations.

13. Why has bank fraud never been eliminated?
(a) Financial experts were taught that the way banking worked in the US was the only way it could work, and so the fraud kept on going.
(b) The Federal Reserve was influenced by lobbyists who advocated fraudulent regulations.
(c) The Federal Reserve was controlled by outside political interests that fostered fraud.
(d) The Federal Reserve tried to institute European standards which led to the perpetuation of fraud.

14. Some tactics include cherry-picking examples while oversimplifying causes.
(a) One tactic is cherry-picking examples while oversimplifying causes.
(b) One tactic is having others provide testimonials on their behalf.
(c) One tactic is to accuse others of lying about the facts.
(d) One tactic is providing great detail about their causes.

15. During which president's administration were policies that were a hybrid of socialism and capitalism developed?
(a) The American public's interest in socialism brought about policies that were a hybrid of socialism and capitalism during the Truman administration.
(b) The American public's interest in socialism brought about policies that were a hybrid of socialism and capitalism during Franklin D. Roosevelt's administration.
(c) The American public's interest in socialism brought about policies that were a hybrid of socialism and capitalism during the Nixon administration.
(d) The American public's interest in socialism brought about policies that were a hybrid of socialism and capitalism during the Eisenhower administration.

Short Answer Questions

1. Who was the mastermind behind the Federal Reserve?

2. How did the development of paper money begin?

3. What important aspect about the economic history of the country did the author fail to mention?

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

5. What impact does deflation have on individuals who are repaying loans?

(see the answer keys)

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