Everything else held constant,an increase in the time deposit ratio will mean ________ in the M2 money multiplier and ________ in the M2 money supply.

Question

Quizplus · Accepted Answer

An increase in the time deposit ratio means that a larger proportion of deposits are held in time deposits, which are not included in M2. This reduces the amount of money available for lending and investment, which in turn reduces the M2 money multiplier and the M2 money supply.

Everything Else Held Constant,an Increase in the Time Deposit Ratio