Note:-Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.Answer completely.You will get up vote for sure. Fed doubles monetary baseDuring the fourth quarter of 2008, the Fed doubled the monetary base but the quantity of money (M2) increased by only 5 percent.Why did M2 not increase by much more than 5 percent? What would have happened to the quantity of M2 if the Fed had kept the monetary base constant?The quantity of MZ did not increase by much more than 5 percent becauseA. the desired reserve ratio increasedO B. interest rates roseO C. the desired reserve ratio decreasedO D. the currency drain ratio decreasedO E. the quantity of M1 decreasedIf the Fed had kept the monetary base constant when the money multiplier decreased, the quantity of M2 would haveO A. become equal to the monetary baseB. decreasedwhich decreased the money multiplier.O C. become equal to the quantity of M1O D. increased

The relationship between the monetary base (MB) and the money supply (M2) is influenced by various…

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Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter11: The Monetary System

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Fed doubles monetary base
During the fourth quarter of 2008, the Fed doubled the monetary base but the quantity of money (M2) increased by only 5 percent.
Why did M2 not increase by much more than 5 percent? What would have happened to the quantity of M2 if the Fed had kept the monetary base constant?
The quantity of MZ did not increase by much more than 5 percent because
A. the desired reserve ratio increased
O B. interest rates rose
O C. the desired reserve ratio decreased
O D. the currency drain ratio decreased
O E. the quantity of M1 decreased
If the Fed had kept the monetary base constant when the money multiplier decreased, the quantity of M2 would have
O A. become equal to the monetary base
B. decreased
which decreased the money multiplier.
O C. become equal to the quantity of M1
O D. increased

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