The Money Mystery Ch: 6

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Questions and Answers

What event contributed to a panic for the exchange of dollars in 1981?

The signing of a peace treaty with Israel

The fall of the Berlin Wall

The hostage crisis (correct)

The U.S. involvement in the Gulf War

What was the reaction of foreign holders of dollars during the dollar faltering?

They began to hoard gold exclusively

They decided to invest more in U.S. assets

They increased their investments in U.S. stocks

They were tempted to switch to another currency (correct)

What economic condition did knowledgeable investors recall during the dollar's decline?

Post-World War II recovery

The Great Depression

The Dot-com bubble

Great French runaway inflation (correct)

What did the reports in November 1979 indicate regarding foreign holders' perspective on the dollar?

They worried about their funds being blocked Signup and view all the answers

What was the sentiment among Europeans regarding the U.S. dollar as reported in December 1979?

They feared the consequence of the Iranian crisis Signup and view all the answers

What motivated the followers of Ayatollah Khomeini to seize the American embassy in 1979?

To seek asylum for the Shah Signup and view all the answers

Why did the application of freezing Iranian assets not work as intended?

The militants holding the hostages were unaffected by the freeze Signup and view all the answers

What was the perceived risk that other foreign investors faced during the hostage crisis?

Their assets could be frozen due to political actions Signup and view all the answers

What was the initial action taken by the U.S. in response to the hostage situation?

Freeze Iranian assets held in the United States Signup and view all the answers

What did the freeze on Iranian assets symbolize for U.S. politicians during the hostage crisis?

An approach to release hostages swiftly Signup and view all the answers

How did the public perceive President Carter's decision not to unfreeze the assets?

As a weak response to international demands Signup and view all the answers

What kind of dictator was the Shah described as in the context?

Ruthless and oppressive Signup and view all the answers

What was the underlying fear of investors regarding the freeze on Iranian assets?

Their money might also be frozen if tensions escalated Signup and view all the answers

What significant financial action occurred as a result of the hostages situation in 1981?

$3.89 billion was released by U.S. officials Signup and view all the answers

What was a primary concern for foreign holders of dollars during the economic turmoil described?

The safety of their investments in the U.S. Signup and view all the answers

Which economic concept was largely misunderstood by the news media during the reported financial crisis?

Demand for money Signup and view all the answers

What metaphor did Freidrich W. Menzel use to describe the dollar?

A hot potato Signup and view all the answers

What was the expected consequence of the Carter administration's economic mistakes as reported in December 1979?

Fear among Europeans regarding the U.S. economy Signup and view all the answers

Which statement reflects a concern over the financial stability of the U.S. dollar?

The dollar was experiencing a significant decline. Signup and view all the answers

What significant event contributed to the financial panic discussed?

The freezing of Iranian assets Signup and view all the answers

What was the main reason the Khomeini followers seized the American embassy?

To seek the release of the Shah Signup and view all the answers

How did the U.S. government react to the hostage crisis?

By freezing Iranian assets in the U.S. Signup and view all the answers

What was one consequence of freezing Iranian assets?

It did not affect the militants holding the hostages Signup and view all the answers

What concern did foreign investors have regarding the freeze of Iranian assets?

That their own assets might also be frozen Signup and view all the answers

What was one of the challenges faced by the Carter administration during the hostage crisis?

Public perception of their handling of the situation Signup and view all the answers

What role did the Shah play in the Iranian hostage crisis?

His existence was what the militants were ultimately after Signup and view all the answers

What was one method that was NOT utilized by the U.S. to resolve the hostage situation?

Negotiating a prisoner exchange Signup and view all the answers

What did the successful execution of Iranian asset freezes rely on?

The presence of Iranian wealth in the U.S. Signup and view all the answers

Study Notes

The Iran Hostage Crisis and the Freezing of Iranian Assets

On November 3, 1979, followers of Ayatollah Khomeini seized the American embassy in Iran and took 52 hostages.
The hostage-takers demanded the return of the Shah of Iran, who had been overthrown earlier that year.
The Shah, a ruthless dictator, had been a long-time ally of the United States. He had been supported by the CIA in a 1953 coup.
The Khomeini government was unable or unwilling to intervene in the hostage crisis, and neither could the Carter administration.
The Carter administration froze Iranian assets in the United States in an attempt to pressure the Iranian government to release the hostages. However, this had little effect on the hostage-takers, as they were not wealthy Iranians with assets in the US.
The freezing of Iranian assets sparked a global panic and a run on the dollar by foreign investors concerned about the safety of their own assets.
The dollar weakened significantly, and the global economy entered a period of instability.
The freeze on Iranian assets had a profound impact on the global financial system, highlighting the vulnerability of international markets to political events. It also demonstrated the power of the US government to seize assets in times of crisis.
The hostages were released in 1981, and the US government returned 3.89billioninfrozenassets.However,3.89 billion in frozen assets. However, 3.89billioninfrozenassets.However,5 billion remained frozen at the end of the decade.

Iran hostage crisis and the freezing of Iranian assets

On November 3, 1979, Iranian militants took 52 American hostages at Embassy in Tehran, demanding the Shah’s return.
The Shah, a former US ally, had been overthrown in 1979 by the Iranian revolution led by Ayatollah Khomeini.
The US government held Iranian assets in the US, and the US had imposed a freeze on the assets, intending to use them as leverage to secure the hostages’ release.
This freeze, however, was not effective in pressuring the hostage takers, who were not wealthy Iranians with assets in the United States.
The freeze had a detrimental effect on the global economy, causing a run on the dollar and increasing concerns about the safety of foreign investors’ money.
Investors feared that the freeze could set a precedent, potentially leading to the freezing of their own assets if their governments angered the US.
The US government ultimately unfroze $3.89 billion of frozen Iranian assets in 1981 to secure the release of the hostages, but the freeze had lasting repercussions.
The incident illustrated the risks of using the freeze of a nation’s assets as a foreign policy tool, particularly with potentially harmful consequences for global financial stability.

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Description

This quiz explores the key events and consequences of the Iran Hostage Crisis that began on November 3, 1979. It examines the roles of Ayatollah Khomeini, the U.S. government's response, and the impact of freezing Iranian assets. Test your knowledge on this critical moment in U.S.-Iran relations.