Deck 19: Financial Developments 1863–1914

Question 1

In 1912,the National Monetary Commission denounced the existing financial system of the U.S.and,in a report,detailed the levels at which it restricted domestic producers' abilities to function globally.

Answer 1

True

Question 2

The "Crime of '73" did not stop the Federal Treasury from buying massive amounts of silver at above-market prices before 1900.

Answer 2

True

Question 3

By 1900,what did the National Banking System under the Bank Act of 1863?(and subsequent amendments)help national banks attain?

A) A majority of banking establishments
B) A majority of banking assets
C) A monopoly issue of paper money
D) All of the above

Answer 3

A monopoly issue of paper money

Question 4

The Federal Reserve System began operating in 1914,finally

A) giving the U.S. its first 100 percent gold-backed paper money.
B) creating a privately-owned system for clearing checks on a national scale.
C) giving the U.S. its first government-owned central bank.
D) giving the U.S. its first unified currency issue, the Federal Reserve Note.

Question 5

The Federal Reserve Bank of 1914 permitted the Fed to compete with banks for profits.

Question 6

The Aldrich-Vreeland Act of 1908 provided for temporary emergency currency for national banks.

Question 7

Contrary to Populist views,the lending practices during industrialization provided ample opportunities for firms and agriculturalists to invest,grow and develop.

Question 8

The need to issue paper money increased with the frequent use of checks.

Question 9

During a banking crisis during the period of free banking,the unexpected surge in the demand for money in the form of specie would cause bankers to call in loans which would,in turn,squeeze credit,slow output and increase unemployment.

Question 10

Financial intermediation supports economic growth and development by bringing together numerous savers and investors in growing and increasingly complex markets.

Question 11

Merchant banks and land mortgage companies were the result of the expansions in the transportation and industrial systems.

Question 12

The Greenbackers' demand to back the greenback issues with gold reserves was not practical in the late 1860s.

Question 13

Borrowers rely on financial intermediaries to hold and find uses for their funds that promise a positive expected rate of return.

Question 14

The report of the 1911 National Monetary Commission

A) advocated a turn to bimetallism.
B) advocated unification of the state and national banking systems.
C) advocated centralized reserve associations which would coordinate ?commercial banking processes such as check clearing.
D) advocated a unified central bank modeled after the Bank of England.

Question 15

Until 1863,National Banking was a mix of licensing by state charters,banking done by nonchartered private bankers,and free banking.

Question 16

The Greenbackers may be characterized fairly as inflationists.

Question 17

Intangible assets like stocks and bonds were created by U.S.industrial firms and traded elsewhere for capital funds.This activity eventually gave rise to investment banking.

Question 18

The Populists succeeded in using the federal government to limit subsidies granted to corporations.

Question 19

All national banks were required to join the Federal Reserve Bank of their region; however,state banks could do so on a voluntary basis.

Question 20

The panic of 1893 was caused by the Sherman Silver Act of 1890,which doubled the Treasury's monthly purchase rates to 4.5 million ounces of silver at current market prices and was eased when President Cleveland called for the Act's repeal on June 30,1893.

Question 21

The increase in tax on state bank notes from 2 to 10 percent provided state banks incentive to

A) attract more demand deposits and increase the use of checks.
B) increase the amount of state notes and use them to extend bank credit.
C) increase the minting of coins and use them for exchange and lending purposes.
D) all of the above.

Question 22

Prior to the establishment of the Federal Reserve System (1913),reserve requirements

A) limited the banks' ability to lend.
B) did not restrict the amount of paper-money issued by banks.
C) freed banks to create as much money as the market could bear without regard for risk and withdrawal rates.
D) forced banks to place deposits in the national bank.

Question 23

Under the bimetallic system,when did the U.S.experience a depletion in its reserve species?

A) When imports exceeded exports
B) When exports exceeded imports
C) When the U.S. closed its borders to all international trade
D) When the trading partners of the U.S. refused all U.S. imports

Question 24

The National Banking System under the Bank Act of 1863 created a banking system comprised?of a mixture of

A) special state charters.
B) nonchartered private banks.
C) free banks.
D) all of the above.

Question 25

Davis (1963)compares U.S.and British industrialization.What does he note in each country during industrialization?

A) A rise in the number of giant banks in both countries
B) A rise in the number of small banks in the U.S. but a rise in the number of giant banks in ?Great Britain
C) A rise in the number of small banks in Great Britain but a rise in the number of giant banks in?the U.S.
D) A decrease in capital accumulation because of a small number of free banks

Question 26

Between 1865 and 1914,individuals in households could use the income they did not spend to ?do what?

A) Purchase stocks
B) Buy bonds
C) Place money in savings accounts
D) All of the above

Question 27

Which is considered fiat money?

A) Greenbacks
B) Gold coins
C) Silver dollars
D) Silver certificates

Question 28

The National Banking Act of 1863,did which of the following?

A) Permitted interstate branch banking
B) Created one national central bank in the U.S.
C) Created federally chartered national banks restricted to conducting businesses ?within a designated state.
D) Created federally chartered national banks open to conducting businesses ?across states.

Question 29

Under the National Banking Acts of 1863 and 1864,the U.S.monetary system

A) experienced drastic changes.
B) played a role in helping the Union finance the Civil War.
C) permitted, for the first time, the federal government to charter banks.
D) protected the rights of states to be the only entities to charter banks.

Question 30

The federal government can fund financially strained programs by

A) Decreasing taxes
B) Increasing funding across all programs
C) Destroying money
D) Issuing U.S. Treasury bonds

Question 31

Banking failures result when

A) banks do not hold 100 percent of their customers' deposits in their vaults.
B) banks make loans.
C) bank withdrawals exceed their reserves.
D) all of the above occur.

Question 32

Today,financial intermediaries specialize in all of the following activities except

A) Printing money
B) Lending
C) Borrowing
D) Accepting deposits

Question 33

Out of the various types of M1 (demand deposits,coins and bank notes),only demand deposits

A) can be used to generate loans by banks.
B) serve as a medium of exchange.
C) serve as a unit of account.
D) store value.

Question 34

How do banks and financial intermediation support economic growth and development?

A) By helping businesses secure the funds needed for capital accumulation and technology advancements
B) By assisting customers in buying durable and nondurable goods and services
C) By financing government expenditures when tax revenue falls below planned spending
D) By granting loans to foreign-born individuals to invest in countries outside of the U.S.

Question 35

According to the Quantity Theory of Money,the excessive printing of currency (the issuance of greenbacks and national bank notes)generated the post-Civil War increases in

A) productivity.
B) prices.
C) production.
D) rising real wages and incomes for all individuals.

Question 36

What are demand deposits?

A) Money held by private individuals or corporations placed in depository ?accounts at banks
B) Liabilities (things that are owed) to banks and assets (things of value) to?depositors or bank customers
C) Checking accounts that depositors can use on demand
D) All of the above

Question 37

According to Hughes and Cain (2011),what did the Populists want?

A) To use the federal government to redistribute income and wealth
B) A more direct democracy that limited the powers of state legislatures
C) A secret voting ballot and public education
D) All of the above

Question 38

Economic institutions like the Federal Reserve System of 1914 created by legislation are designed to:

A) Only achieve economic goals
B) Garner votes
C) Satisfy the well organized interests of ?special groups
D) All of the above

Question 39

According to Davis (1963),industrial firms need capital to expand,grow and develop.They will ?seek the most efficient means to finance this capital.In the U.S.during its period of industrialization,industrialists raised the resources needed to invest in capital accumulation by

A) tapping into the lending power of giant commercial banks.
B) utilizing the lending power of a large number of small banks.
C) merging.
D) engaging in all of the above.

Question 40

Under the Bland-Allison Act of 1878,

A) the U.S. Treasury committed to buying silver for coins at the ?current market price.
B) the U.S. Treasury committed to buying gold for coins at a set price.
C) the U.S. was placed on the gold standard.
D) the National Monetary Commission was created.

Question 41

Discuss the banking crisis management techniques of Pierpont Morgan.Integrate Davis' (1963)thesis in identifying why Morgan,a private individual,was involved in bank management crisis.?Why did the Federal Reserve System initially adopt some form of his techniques?

Question 42

What is the Federal Reserve System? What are its current functions?

Question 43

Describe the differences between the ways U.S.and British industrialists could seek capital funding.How did these differences produce different financial developments and patterns of industrialization in these countries?

Question 44

Revisit the Quantity Theory of Money from Chapter 3.Identify the relationship between an increase in the supply of money and inflation.

Question 45

Describe the Populist movement and explain why supporters wanted the federal government to assume responsibility for economic welfare in the form of public education,low unemployment,?and abolishing a national banking system.

Question 46

Populists proved themselves to be strong "quantity theory" activists by

A) pushing the government to provide a general level of money demand that could be kept abreast ?of farm output.
B) advancing public education and woman suffrage efforts.
C) trying to prohibit corporate subsidies.
D) seeking to reserve land and other natural resources for farm and conservation use.

Question 47

Discuss the risks of using paper money to provide an adequate supply of money for the economy.Describe how a central bank,government regulation or coordinated actions by banks can help ?reduce these risks.

Question 48

Which group opposed having lots of money in the economy after the Civil War and before ?World War I?

A) Those individuals with debt (businesses)
B) Those buying and selling commodities (farmers)
C) Those providing credit through deposits and other venues (wealthy and savers)
D) Those benefitting from rising wages and prices

Question 49

Describe the disadvantages that unexpected inflation places on (i)people living on fixed incomes,?(ii)workers whose wages and salaries are set by contracts,and (iii)creditors.

Question 50

Describe the concerns of private citizens over the ways in which local,state and federal governments,federally-chartered and state-chartered banks and the Bank of England attempted to maintain the stability of paper money at different times from 1700 to 1860.Chapter 12 complements Chapter 19?in providing information required to complete this essay.

Question 51

Describe the economic and political debates over money from 1865 to 1933.

Question 52

Identify the entities that want inflation and explain why they want it.

Question 53

Investment banks specialize in

A) Managing borrowing and the deposits of its customers
B) Managing commercial papers
C) Facilitating the loan interactions between banks and merchants
D) Handling long-term securities such as stocks, bonds and other securities.

Question 54

Explain why the Populists wanted the national banks to increase the stock of money by issuing greenbacks.Discuss their desire for inflation.

Question 55

Subsidies for silver,the Bland-Allison Act of 1878,and the Silver Purchase Acts of 1890 and 1933 all provide examples of government programs

A) based on careful analysis of benefits relative to costs.
B) designed to redistribute income from the rich to the poor.
C) that reflect the political attractiveness of special-interest issues.
D) that promote the general welfare.

Question 56

What is financial intermediation? Discuss how it contributes to economic growth.

Question 57

The National Banking Acts of 1863 and 1864 attempted to make the national banking system seem stronger than the state banking system by all of the following EXCEPT:

A) Imposing legal reserve requirements on national banks
B) Providing depository insurance
C) Linking the capital requirements of national banks to the size of ?the cities in which they were located
D) Making national bank notes legal tender

Question 58

Discuss the drive to regulated banking through the public sector and through the private sector.Chapter 12 complements Chapter 19 in providing information required to complete this essay.

Question 59

Describe the developments in the national banking system from 1790 to 1863.

Question 60

When interest rates rise,the price of bonds:

A) Increases
B) Decreases
C) Stays the same
D) can be determined.

Question 61

Explain how pensions for soldiers,subsidies for shipbuilders and operators,subsidies and land ?grants to railroads,and tariffs to protect some industries from foreign competition illustrate the ?power of well organized special interest groups.Discuss the secondary economic effects of these efforts on the unorganized collective majority.