Part 1 - Check Your Understanding - Answer the following questions. 1. Money is printed by the U.S. Treasury Department and yet economists claim that banks create money. Fully explain how banks create money. 2. Why is the reserve requirement the key variable to determine how much money a bank is able to create? 3. Why is the assumption that banks lend out all excess reserves usually a valid assumption? 4. In the last decade, banks have tended to keep excess reserves for the first time in decades. How would this change in behavior affect the value of the money supply? Explain. 5. In addition to holding excess reserves, identify a second "leakage" that could cause the multiplier to decrease