Canada's M1 multiplier is ________ than Canada's M2 multiplier because the currency drain for M1 is ________ than for M2,and the desired reserve ratio for M1 is ________ than for M2.

Question

Quizplus · Accepted Answer

M1 includes only currency in circulation and demand deposits, which are more likely to be quickly withdrawn by depositors, leading to a larger currency drain. As a result, the desired reserve ratio for M1 is larger compared to M2, which includes less liquid assets like savings deposits and time deposits. Therefore, the M1 multiplier is smaller than M2 multiplier, making option A the best choice.

Canada's M1 Multiplier Is ________ Than Canada's M2 Multiplier Because