Question: Figure 17 11 shows a sharp decline of the M1 money
Figure 17.11 shows a sharp decline of the M1 money multiplier in 2008. What caused the drop? Using the indicators for currency (FRED code: CURRENCY), total reserve balances maintained (FRED code: RESBALNS), reserve balances required (FRED code: RESBALREQ), and checkable deposits (FRED code: TCDSL), plot since 2000 the currency-to-deposit ratio and the excess reserve-to-deposit-ratio. Which one caused the M1 money multiplier to plunge? (Hint: To estimate excess reserves, see footnote 8. Divide RESBALREQ by 1000 to convert the units to billions ofdollars.)
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