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This quiz consists of 5 multiple choice and 5 short answer questions through Section I. What Creature Is This? Chapter 4 Home Sweet Loan.

Multiple Choice Questions

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

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

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

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

5. The Federal Reserve System was designed to control what element of member banks?
(a) The Federal Reserve System was designed to control a bank's ability to make loans.
(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 cash flow.
(d) The Federal Reserve System was designed to control how much reserve cash a bank can invest in its expansion.

Short Answer Questions

1. How did unemployment impact the economic problems?

2. When the entire banking system failed, what did the Federal government turn to to bolster the failed back up system?

3. How did many people feel about those who went too far into debt?

4. After analysis, what was the real nature of the S&L system?

5. In what year was the concept of the Federal Reserve first developed?

(see the answer key)

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