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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. How did the banks make their money?
(a) The banks made money on principle, not on interest 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 interest, not principle, payments.

2. How was the nationalization of banks justified?
(a) Nationalization was necessary for the public good.
(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 IMF.

3. In what year was the concept of the Federal Reserve first developed?
(a) The concept of the Federal Reserve was developed in 1920.
(b) The concept of the Federal Reserve was developed in 1952.
(c) The concept of the Federal Reserve was developed in 1966.
(d) The concept of the Federal Reserve was developed in 1910?

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 refused to back the bad debt.
(d) If the debtors stopped paying altogether, the Federal Reserve System fined them.

5. What organization ensures the nationalization of banks?
(a) As long as the FDIC existed, it would continue nationalizing banks and perhaps other industries as they fell into financial difficulties.
(b) As long as the Federal Reserve System existed, it would continue nationalizing banks and perhaps other industries as they fell into financial difficulties.
(c) As long as the Congressional Banking Committee existed, it would continue nationalizing banks and perhaps other industries as they fell into financial difficulties.
(d) As long as the International Monetary Fund existed, it would continue nationalizing banks and perhaps other industries as they fell into financial difficulties.

Short Answer Questions

1. What resulted from the 1970 Penn Central Railroad bailout?

2. What is the true function of the FDIC?

3. What resulted after the first electronic run on banks in 1983?

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

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

(see the answer key)

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