During the three years following the financial crisis of 2008,

Question

Quizplus · Accepted Answer

During the three years following the financial crisis of 2008, the Federal Reserve engaged in a massive expansionary monetary policy by increasing the monetary base through a process known as quantitative easing. The monetary base more than doubled from around $800 billion to over $1.7 trillion by 2011. However, the M1 money supply, which includes currency in circulation and demand deposits, increased much less rapidly, only growing from around $1.4 trillion to $1.8 trillion during the same period. This is because many banks chose to hold excess reserves as a precautionary measure, rather than lending out the funds to consumers and businesses. Therefore, choice B is the correct answer.

During the Three Years Following the Financial Crisis of 2008