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

Multiple Choice Questions

1. What country contributed the largest investment in the IMF?
(a) Member nations contributed to the IMF, with England giving the most.
(b) Member nations contributed to the IMF, with the Soviet Union giving the most.
(c) Member nations contributed to the IMF, with the European Union giving the most.
(d) Member nations contributed to the IMF, with the US giving the most.

2. Why was the "Federal Reserve System," so named?
(a) The "Federal Reserve System" was so named so that people would think it was part of the Federal government.
(b) The "Federal Reserve System" was so named so that people would have respect for it.
(c) The "Federal Reserve System" was so named because its offices were not state run.
(d) The "Federal Reserve System" was so named so that people would know that it was part of the Federal government.

3. What caused the economy to get into such a state that the government was compelled to bail out banks?
(a) The argument could be made that lax lending practices and overly speculative investments had forced the government to use tax dollars in the bailouts.
(b) The American people were taking out too many home loans.
(c) The International Monetary Fund had become dangerously unstable.
(d) The US Congress failed to pass legislation that would have boosted the economy.

4. What city became a major part of the welfare state in 1975?
(a) Chicago became a major part of the welfare state in 1975 via Federal government bailouts.
(b) Atlanta became a major part of the welfare state in 1975 via Federal government bailouts.
(c) New York City became a major part of the welfare state in 1975 via Federal government bailouts.
(d) Los Angeles became a major part of the welfare state in 1975 via Federal government bailouts.

5. What is the fundamental basis of capitalism?
(a) The main idea behind capitalism was providing welfare to the less fortunate.
(b) The main idea behind capitalism was investment and return on investment.
(c) The main idea behind capitalism was making money and hoarding cash.
(d) The main idea behind capitalism was making investments in foreign interests.

6. Many people feel that the economic system has been rigged to favor what group of people?
(a) People have realized, at least a little bit, that our economic system had been rigged somewhere in the past to favor the poor by stealing from the rich and middle classes.
(b) People have realized, at least a little bit, that our economic system had been rigged somewhere in the past to favor the middle classes by stealing from the rich and poor classes.
(c) People have realized, at least a little bit, that our economic system had been rigged somewhere in the past to favor the rich by stealing from the government revenues.
(d) People have realized, at least a little bit, that our economic system had been rigged somewhere in the past to favor the rich by stealing from the poor and middle classes.

7. Why did banks ask for interest-only payments?
(a) The bank would arrange for interest payments only so that their customers could keep a good credit rating>
(b) The bank would arrange for interest payments only to keep the loan viable.
(c) The bank would arrange for interest payments only to take the burden off the customer.
(d) The bank would arrange for interest payments only to keep the profits coming in.

8. What generalization did the author make about conspiracy theorists?
(a) There were two kinds of people in the world--those who believed in conspiracy and those who did not.
(b) Those who believe in conspiracy theories usually are better educated than the average person.
(c) Conspiracy theorists are generally more intelligent than the general population.
(d) Those who believe in conspiracy theories are usually more well-informed than most people.

9. What was the main argument in favor of nationalizing banks?
(a) 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.
(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 a weak economy would recover more quickly.
(d) The fundamental argument in favor of the nationalization was that such bailouts would be allowed only once.

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

11. After analysis, what was the real nature of the S&L system?
(a) The S&L system turned out to actually be a cartel within a cartel.
(b) The S&L system turned out to actually be operated by international interests.
(c) The S&L system turned out to actually be criminal.
(d) The S&L system turned out to actually be a scam.

12. 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 the Nixon administration.
(c) The American public's interest in socialism brought about policies that were a hybrid of socialism and capitalism during the Eisenhower administration.
(d) The American public's interest in socialism brought about policies that were a hybrid of socialism and capitalism during Franklin D. Roosevelt's administration.

13. What did the U.S. government do to support banks?
(a) The U.S. government guaranteed depositor money through private insurance companies.
(b) The U.S. government forgave the debot of failing banks.
(c) The U.S. government guaranteed depositor money through the FDIC.
(d) The U.S. government guaranteed depositor money through Congress.

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

15. 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 funds were tied up in bank bailouts.
(d) 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.

Short Answer Questions

1. How does a currency drain occur within the banking system?

2. What does the FDIC stand for?

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

4. Prior to the establishment of the Federal Reserves, what caused massive bank failures?

5. What organization ensures the nationalization of banks?

(see the answer keys)

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