content area top Part 1 Fed doubles monetary base During the fourth quarter of 2008, the Fed doubled the monetary base but the quantity of money (M2) increased by only 5 percent. Source: Federal Reserve Why did M2 not increase by much more than 5 percent? What would have happened to the quantity of M2 if the Fed had kept the monetary base constant? Question content area bottom Part 1 The quantity of M2 did not increase by much more than 5 percent because _______, which decreased the money multiplier. A. the desired reserve ratio decreased B. interest rates rose C. the quantity of M1 decreased D. the currency drain ratio decreased E. the desired reserve ratio increased Part 2 If the Fed had kept the monetary base constant when the money multiplier decreased, the quantity of M2 would have _______. A. become equal to the monetary base B. become equal to the quantity of M1 C. decreased D. increased E. not changed