Practice Quiz

CLEP US History I

Category - Economy

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The depression caused by the Panic of 1837 resulted in which of the following changes in banking in most states?
  1. Banks had to insure the majority of their deposits.
  2. Private enterprise was required to financially back banks.
  3. Paper currency was eliminated.
  4. Legislatures were no longer allowed to go into debt.
  5. Banks had to be approved by the federal government.
Explanation
Answer: D - After the Panic of 1837, most states passed laws preventing the legislature from going into debt. The fact that states had borrowed money made them vulnerable in the economic collapse that followed the devaluation of the U.S. dollar. They hoped that remaining debt-free would eliminate this issue in the future. The banking reform that required individual deposits to be insured would not emerge until the Great Depression.
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