Sometimes, when a country is going through economic difficulties, the government will restrict how much money people can withdraw from their bank accounts. Why would the government do this? How would it help to restrict withdrawals if there is an economic panic? Is such a policy fair? Explain your answers.

If the Fed increases the money supply, what do you expect to happen to the exchange rate (foreign currency per dollar)? Will it increase or decrease? Explain your answer.

In 2008, the Fed began massively increasing the money supply. Did the exchange rate meet your prediction from (5)? If so, how can you tell? If not, offer a possible reason why it did not.