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

Multiple Choice Questions

1. 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 guaranteed depositor money through the FDIC.
(c) The U.S. government guaranteed depositor money through Congress.
(d) The U.S. government forgave the debot of failing banks.

2. 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 sixty 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 twenty 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 fithy 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.

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

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

5. What resulted after the first electronic run on banks in 1983?
(a) The first electronic run on banks happened in 1983, leading to one trillion dollars being added to the deficit.
(b) The first electronic run on banks happened in 1983, leading to a massive bailout in the $6 billion range.
(c) The first electronic run on banks happened in 1983, leading to a collapse of the economy.
(d) The first electronic run on banks happened in 1983, leading to a hoarding of cash.

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

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

8. 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 Nixon 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 Truman administration.
(d) The American public's interest in socialism brought about policies that were a hybrid of socialism and capitalism during the Eisenhower administration.

9. What risky loan activities have banks participated in?
(a) Banks loaned depositors' money to foreign governments who refused to repay the loans.
(b) Banks loaned depositors' money out to poor people during the Great Depression.
(c) Banks loaned depositors' money out to to the US government in times of economic downturns.
(d) Banks loaned depositors' money out to risky debtors who would likely not be able to pay the loans off.

10. 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 not made available by Congress.
(b) 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.
(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 funds to do this were not adequate.

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

12. What happened when a debtor defaulted on a loan?
(a) When a debtor defaulted on a loan, he would first ask for more time to pay.
(b) When a debtor defaulted on a loan, he would ask loan payments be waived.
(c) When a debtor defaulted on a loan, he would stop making payments.
(d) When a debtor defaulted on a loan, he would ask the government for a guaranteed loan.

13. What does the FDIC stand for?
(a) The FDIC stands for The Federal Deposit Insurance Corporation.
(b) The FDIC stands for The Federal Debt Issuers Company.
(c) The FDIC stands for The First Debt Institute of Connneticut.
(d) The FDIC stands for The First Depositor's Insurance Corporation.

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

15. Why did banks make risky loans?
(a) 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.
(b) Banks did not thoroughly check out the risk factor of some borrowers.
(c) The US Congress passed legislation that required banks to make ten percent of their loans to risky borrowers.
(d) Banks are required by the Federal Reserve to make a certain percentage of risky loans.

Short Answer Questions

1. What action was taken by the Federal Reserve during the 1980s S&L crisis?

2. What is the Fabian plan?

3. How did the Federal Reserve System accomplish the nationalization of banks?

4. What do some feel was the reason for establishing the Federal Reserve?

5. What is the true function of the FDIC?

(see the answer keys)

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