In Canada
A)the money multiplier increases when the desired reserve ratio increases.
B)the M1 multiplier decreases over time.
C)the money multiplier increases when the currency drain ratio increases.
D)the M1 multiplier is less than the M2 multiplier.
E)the M2 multiplier decreases over time.

Question

Quizplus · Accepted Answer

The M1 multiplier is typically less than the M2 multiplier because M2 includes a broader set of financial assets, including those in M1 plus savings deposits, time deposits, and non-institutional money market funds, which generally have a lower reserve requirement or none at all, allowing for a greater expansion of the money supply for a given amount of base money.