1.If I deposit $1000 cash into my checking account, and the bank is obliged to hold 5% of deposits, what will be the total increase in the money supply (including the original deposit)? $20,000 $50 $5000 $200 ($50 is incorrect)

2.If a dramatic decrease in private investment seems to suggest a recession is imminent, the Federal Reserve is most likely to ____government bonds to/from the large banks, in order to____ the money supply and_______ interest rates.

a. Sell, increase, increase

b.Sell, decrease, decrease

c.Buy, increase, decrease

d.Sell, increase, decrease

3.Banks are required to hold a minimum reserve ratio to make them less likely run low on liquidity, because that encourages

a.Bank mergers

b.Leverage

c.Bank runs