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This quiz consists of 5 multiple choice and 5 short answer questions through Section I. What Creature Is This? Chapter 3 Protectors of the Public.

Multiple Choice Questions

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

2. What historic reference is contained in this chapter?
(a) A history of bailouts was outlined in this chapter, starting in 1970 with Penn Central Railroad.
(b) A history of the Federal Reserve chairmain is contained in this section.
(c) A history of the laws regulating the economy is contained in this chapter.
(d) A history of legislation regarding the Federal Reserve is contained in this section.

3. What has caused the economy's boom-bust cycle?
(a) The economy's boom-bust cycle is caused by the instability of the International Monetary Fund.
(b) The economy's boom-bust cycle is caused from trade deficits.
(c) The Federal Reserve's advertised purpose was to stabilize the economy, but depressions and recessions have resulted instead in a boom-bust cycle.
(d) The economy's boom-bust cycle is caused from people hoarding cash.

4. If the debtors stopped paying banks altogether, what action would the Federal Reserve System take?
(a) If the debtors stopped paying altogether, the Federal Reserve System gave the banks more money.
(b) If the debtors stopped paying altogether, the Federal Reserve System filed suit in Federal Court.
(c) If the debtors stopped paying altogether, the Federal Reserve System fined them.
(d) If the debtors stopped paying altogether, the Federal Reserve System refused to back the bad debt.

5. Why did banks offer debtors more credit?
(a) Banks offered more credit to debtors to increase interest payments to the them.
(b) Banks offered more credit to debtors to help them purchase homes.
(c) Banks offered more credit to debtors to so they could increase their purchasing power.
(d) Banks offered more credit to debtors to help improve their credit rating.

Short Answer Questions

1. What was the impact of the creation of new money on the currency?

2. What was the main argument in favor of nationalizing banks?

3. How was the nationalization of banks justified?

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

5. What caused the economy to get into such a state that the government was compelled to bail out banks?

(see the answer key)

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