The Fed increased the monetary base between 2008

Question: The Fed increased the monetary base between 2008 a…

The Fed increased the monetary base between 2008 and 2011.

What happened to the money multiplier between 2008 and​2011? What would the money multiplier have been if the currency drain ratio had​increased? What would the money multiplier have been if the​banks’ desired reserve ratio had not​changed?

QUESTIONS:

Between 2008 and​2011, the money multiplier increased, decreased, or remained the same?

In a typical​year, the currency drain ratio is 0.11 and the desired reserve ratio is 0.01.

So if neither the currency drain ratio nor the​banks’ desired reserve ratio had​changed, the money multiplier would have been approximately ______.

If both the currency drain ratio and the desired reserve ratio had​increased, the money multiplier would have been…

1. a) Greater than nine
2. b) Less than nine
3. c) Equal to nine

If the​banks’ desired reserve ratio had not​changed, everything else remained the​ same, the money multiplier would have been …

1. a) Approximately equal to nine
2. b) Less than 9
3. c) Greater than 9