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

Multiple Choice Questions

1. Why did governments favor banks based on a fiat money system?
(a) Governments liked the fiat money because it allowed them to hoard gold.
(b) Governments liked the fiat money because it allowed them to raise taxes.
(c) Governments liked the fiat money because it was a way of confiscating wealth from the citizens without raising taxes.
(d) Governments liked the fiat money because it was a way of confiscating wealth from the rich and redistributing it to the poor.

2. What were the additional goals after the Federal Reserve was established in 1910?
(a) The goals were to craft legislation to bring about: the elimination of small rival banks; recapturing the industrial loan market; and, shifting losses from the banks to the taxpayers.
(b) The goals were to craft legislation to bring about: the elimination of foreign interests; recapturing the bond market; and, shifting losses from the the US to foreign investors.
(c) The goals were to craft legislation to bring about: the elimination of savings and loans; recapturing the foreign loan market; and, shifting losses from the banks to the state governments.
(d) The goals were to craft legislation to bring about: the elimination of bank oversight; debt elimination; and, shifting losses from the taxpayers to banks.

3. What would result if the money system returned to the gold standard?
(a) A return to the gold standard would result in instability and inflationary times.
(b) A return to the gold standard would set off a boom-bust cycle.
(c) A return to the gold standard would result in instability and deflationary times.
(d) A return to the gold standard would require a period of financial pain and many fortunes would evaporate.

4. Which European bank become the model for the Federal Reserve System?
(a) The Bank of England became the model for the Federal Reserve System.
(b) First Banc of France became the model for the Federal Reserve System
(c) The Bank of Madrid became the model for the Federal Reserve System.
(d) Bank One of Rome became the model for the Federal Reserve System.

5. What restrictions were placed on the Bank of Amsterdam which was established in 1609?
(a) In 1609 the Bank of Amsterdam was formed and restricted from making more loans than the deposits it received.
(b) In 1609 the Bank of Amsterdam was formed and restricted from using over twenty percent of its revenues for loans.
(c) In 1609 the Bank of Amsterdam was formed and restricted from making loans with its deposits.
(d) In 1609 the Bank of Amsterdam was formed and restricted from taking foreign deposits.

6. What was the role of the British Ship Lusitania in World War I?
(a) The Lusitania was being used to transport munitions from the US to England under the guise of a passenger liner that also hauled goods.
(b) The Lusitania was being used to transport munitions from the US to England under the guise of being a cargo ship.
(c) The Lusitania was being used to transport soldiers from the US to England under the guise of a passenger liner that also hauled goods.
(d) The Lusitania was being used to transport tanks from the US to England under the guise of a passenger liner that also hauled goods.

7. What caused the economic downturn in 1818?
(a) In 1818 an economic downturn began as the US Congress tightened loan requirements and shrunk the money supply by calling in old loans.
(b) In 1818 an economic downturn began as the IMF tightened loan requirements and shrunk the money supply by calling in old loans.
(c) In 1818 an economic downturn began as the Federal Reserve tightened loan requirements and shrunk the money supply by calling in old loans.
(d) In 1818 an economic downturn began as the banks tightened loan requirements and shrunk the money supply by calling in old loans.

8. How were some organizations able to profit during the boom-bust cycle?
(a) Big fortunes were also made by powerful financiers by hoarding cash. The Bank of England, the House of Morgan and the Rothschilds were among the winners.
(b) Big fortunes were also made by powerful financiers through legislation that favored them. The Bank of England, the House of Morgan and the Rothschilds were among the winners.
(c) Big fortunes were also made by powerful financiers through illegal operations. The Bank of England, the House of Morgan and the Rothschilds were among the winners.
(d) Big fortunes were also made by powerful financiers through market manipulations. The Bank of England, the House of Morgan and the Rothschilds were among the winners.

9. What solid case did governments make for fiat monetary systems?
(a) As long as governments wanted ever more money for projects such as wars, building infrastructure and social programs, the governments would raise the debt ceiling.
(b) As long as governments wanted ever more money for projects such as wars, building infrastructure and social programs, the governments would increase taxes.
(c) As long as governments wanted ever more money for projects such as wars, building infrastructure and social programs, the governments would increase the budget deficit.
(d) As long as governments wanted ever more money for projects such as wars, building infrastructure and social programs, the governments would increase the money supply.

10. What would be the role of the IMF and World Bank in the new world order?
(a) The IMF and World Bank would force the new world currency on all nations.
(b) The IMF and World Bank would force the bust-boom cycle.
(c) The IMF and World Bank would control cash flow.
(d) The IMF and World Bank would limit lending.

11. The Bank of North America was disbanded after what event?
(a) At the end of the Spanish American War, The Bank of North America was disbanded.
(b) At the end of the Revolutionary War, The Bank of North America was disbanded.
(c) At the end of the Civil War, The Bank of North America was disbanded.
(d) At the end of World War I, The Bank of North America was disbanded.

12. What caused the collapse of the Bank of Hamburg in 1813?
(a) Formed in the early 1600s, the Bank of Hamburg stayed solvent until the Nazi Party rose to power.
(b) Formed in the early 1600s, the Bank of Hamburg stayed solvent until World War I.
(c) Formed in the early 1600s, the Bank of Hamburg stayed solvent until Napoleon captured it in 1813.
(d) Formed in the early 1600s, the Bank of Hamburg stayed solvent until the stock market crash of 1929.

13. What caused the boom-bust cycle in the U.S. economy following the Civil War?
(a) The boom-bust cycle was due to the lack of oversight by the US Congress.
(b) The boom-bust cycle was due to the establishment of the Federal Reserve.
(c) The boom-bust cycle was due to the widespread use of paper currency not based by the gold standard.
(d) The boom-bust cycle was due to the widespread use of fiat money and the implementation of many economic tricks that were doomed to failure.

14. What is the basic structure of the U.S. monetary system?
(a) The monetary system in the U.S. was constructed for debt to be necessary in order for Federal Reserve to remain in control of monetary concerns.
(b) The monetary system in the U.S. was constructed for debt to be necessary in order for the economy to flourish.
(c) The monetary system in the U.S. was constructed for debt to be necessary in order for the money supply to remain in existence.
(d) The monetary system in the U.S. was constructed for debt to be necessary in order for the Congress to pass tax increases.

15. What caused wildcat banks to develop?
(a) The central bank reintroduced inflation, and as the country expanded, wildcat banks developed in the wilderness.
(b) The Federal Reserve reintroduced inflation, and as the country expanded, wildcat banks developed in the wilderness.
(c) The central bank reintroduced deflation, and as the country expanded, wildcat banks developed in the wilderness.
(d) The central bank provided generous funds for loans, and as the country expanded, wildcat banks developed in the wilderness.

Short Answer Questions

1. What drove prices upward during the War of 1812?

2. What bank was The Bank of North America modeled after?

3. What did communism become known as in the 1980s?

4. After the 1950s, what was the standard of measure used to estimate the US debt?

5. What deal did the U.S. make with England during World War I regarding the British ship Lusitania?

(see the answer keys)

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