From before the financial crisis began in September of 2007 to when the crisis was over at the end of 2009,the huge expansion in the Fed's balance sheet and the monetary base did not result in a large increase in monetary supply because
A)most of it just flowed into holdings of excess reserve.
B)the Fed also increased the required reserve ratio.
C)the Fed also conducted open market sales.
D)the discount loan decreased.

Question

Quizplus · Accepted Answer

During the financial crisis, the Fed's large expansion of the balance sheet and the monetary base did not result in a significant increase in the money supply because most of the money flowed into bank's excess reserves, which did not lead to an increase in lending or economic activity.

From Before the Financial Crisis Began in September of 2007