During the Financial Crisis of 2007-2009, banks significantly increased their holdings of excess reserves. What impact did this have on the money multiplier? How would the Fed change the monetary base if it wanted to maintain a stable money supply?
What will be an ideal response?
An increase in the excess-to-deposit ratio results in a lower money multiplier. Left alone, this would reduce the money supply. If the Fed want a stable money supply, it would increase the monetary base enough to offset the decline in the money multiplier.
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The ________ measures the change in the demand of a good due to a percentage change in the consumer's income
A) substitution effect of a price change B) income effect of a price change C) cross-price elasticity of demand D) income elasticity of demand
Which aggregate expenditure schedule(s) AE in the diagram for a private closed economy represent(s) the highest level of investment, assuming investment is the same at each level of income and the level of consumption at zero income is the same for each schedule?
A. AE 4 only.
B. AE 2 and AE 3 .
C. AE 1 and AE 4 .
D. AE 3 and AE 4