In the Great Depression, the Fed allowed the money supply to decline. To confirm that the Federal Reserve learned from this lesson, plot since 2000 the M2 multiplier – the ratio of M2 (FRED code: M2SL) to the monetary base (FRED code: AMBSL) and, on the right axis, the level of M2. Explain how the Fed was conducting policy in order to sustain the expansion of M2.
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