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

Multiple Choice Questions

1. How did many people feel about those who went too far into debt?
(a) Many felt that people who were in debt had been encouraged to do so by political figures.
(b) Many felt that the nation had been taught to rely too much on credit.
(c) Many argued that those in deep debt should be forgiven much of their dept because of the reclining economy.
(d) Many argued that people who went too far into debt had done this on their own--nobody had forced people into the mortgages or credit cards.

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

3. What major banks failed in 1972?
(a) In 1972, First Bank of Michigan and New York Bank both failed.
(b) In 1972, Bank of America and Citibank failed.
(c) Unity Bank fell in 1972, as did the Commonwealth Bank of Detroit.
(d) First Bank of California and Wells Fargo Bank failed in 1972.

4. 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 were tied up in bank bailouts.
(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 to do this were not adequate.
(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.

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

6. What action was taken by the Federal Reserve during the 1980s S&L crisis?
(a) The Federal Reserve System usurped the powers of Congress and forgave the S&Ls their debts.
(b) The Federal Reserve System usurped the powers of Congress and began crafting legislation to bail out the S&Ls.
(c) The Federal Reserve System usurped the powers of Congress and declared that the S&Ls had the same rights as banks.
(d) The Federal Reserve System usurped the powers of Congress and started handing out money directly to the S&Ls as well.

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

8. What was the impact of the creation of new money on the currency?
(a) People considered the creation of new money inflationary as the prices of goods and services rose, but in reality it was strengthening the currency in the world market.
(b) People considered the creation of new money inflationary as the prices of goods and services rose but had no impact on the currency.
(c) People considered the creation of new money inflationary as the prices of goods and services rose, but in reality this was a devaluing of the currency.
(d) People considered the creation of new money inflationary as the prices of goods and services rose, but in reality this was increasing the value of the currency.

9. Why was gold considered the ideal metal behind a monetary system?
(a) Gold was considered the perfect metal because of its intrinsic value and scarcity throughout history.
(b) Gold was considered the perfect metal because it was the most sought after of the precious metals.
(c) Gold was considered the perfect metal because it was the most common of the precious metals.
(d) Gold was considered the perfect metal because of its value and availability.

10. What was the location of the meeting where the concept of the Federal Reserve was developed?
(a) The concept of the Federal Reserve was developed on Long Island.
(b) The concept of the Federal Reserve was developed on Jekyll Island.
(c) The concept of the Federal Reserve was developed in the Hawaiin Islands.
(d) The concept of the Federal Reserve was developed on Alcatraz Island.

11. What was one of the strongest arguments in favor of bank regulation versus nationalization?
(a) An argument in favor of regulation was that, when properly administered, it had worked from the time of Franklin D. Roosevelt (President of the US from 1933 to 1945) to 1970.
(b) An argument in favor of regulation was that it would purge the system of fraud and abuse.
(c) An argument in favor of regulation was that it would cause less unemployment.
(d) An argument in favor of regulation was that the American people felt uncomfortable with nationalization.

12. What is laudable about the author's work?
(a) The author provided a clear and concise liberal viewpoint.
(b) The author had majored in international economics.
(c) The author did provide a convincing argument that our economic system had been broken at some time in the past.
(d) The author provided a clear and concise conservative viewpoint.

13. The author made what sports analogy to describe the problems with the banking system?
(a) Using a baseball analogy, the problems with the banking system were presented in a fairly understandable way.
(b) Using a football analogy, the problems with the banking system were presented in a fairly understandable way.
(c) Using a golf analogy, the problems with the banking system were presented in a fairly understandable way.
(d) Using a soccer analogy, the problems with the banking system were presented in a fairly understandable way.

14. What impact does deflation have on individuals who are repaying loans?
(a) Deflation causes people to repay more value on loans taken out during a bear market.
(b) Deflation causes people to repay more value on loans taken out during inflationary times.
(c) Deflation causes people to repay more value on loans during an economic downturn.
(d) Deflation causes people to repay more value on loans taken out during a bull market.

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. Why was platinum not used to back the monetary system?

2. What historic reference is contained in this chapter?

3. What did the U.S. government do to support banks?

4. What resulted when paper money was not backed with gold or silver?

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

(see the answer keys)

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