As a result of the Fed's actions during the 2008 financial crisis and banks' lending policies,
A) the M2 money multiplier fell from 9 to 5.
B) the M2 money multiplier more than doubled.
C) the monetary base decreased by 50 percent.
D) the ratio of currency to M2 deposits more than doubled.
E) the reserve requirement ratio increased.

Question

Quizplus · Accepted Answer

The M2 money multiplier fell from 9 to 5 as a result of the Fed's actions during the 2008 financial crisis and banks' lending policies. The M2 money multiplier is the ratio of M2 money supply to the monetary base, and it decreased due to a decrease in lending and an increase in banks holding excess reserves.

As a Result of the Fed's Actions During the 2008