The Fed increased the monetary base between 2008 and 2011.

What happened to the money multiplier between 2008 and 2011? What would the money multiplier have been if the currency drain ratio had increased? What would the money multiplier have been if the banks' desired reserve ratio had not changed?

QUESTIONS:

Between 2008 and 2011, the money multiplier increased, decreased, or remained the same?

In a typical year, the currency drain ratio is 0.11 and the desired reserve ratio is 0.01.

So if neither the currency drain ratio nor the banks' desired reserve ratio had changed, the money multiplier would have been approximately ______.

If both the currency drain ratio and the desired reserve ratio had increased, the money multiplier would have been ...

a) greater than nine

b) less than nine

c) equal to nine

If the banks' desired reserve ratio had not changed, everything else remained the same, the money multiplier would have been ...

a) approximately equal to nine

b) less than 9

c) greater than 9