Was the money multiplier stable during the Great Recession? Why would an unstable money multiplier pose a problem for monetary policy?
What will be an ideal response?
The money multiplier was not stable during the Great Recession. The money multiplier declined sharply, because the currency—deposit ratio and especially the reserve—deposit ratio both rose dramatically, as people increased their demand for currency, and banks increased their demand for excess reserves. Instability in the money multiplier creates instability in the money supply for a given monetary base.
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Private property rights mean that:
A) individuals cannot be excluded from the consumption of goods and services regardless of whether they pay for them. B) individuals have a right to elect their representatives in the government. C) individuals can own businesses and assets, and their ownership is secure. D) the government does not own any resource used in production in an economy.
Unlike in the long-run model, in the short-run - Keynesian model, we make two critical assumptions: that firms adjust production depending on ___ , and that ____
a. total demand; prices are fixed b. resource limitations; prices are flexible c. the market rate of interest; consumers maximize utility d. consumer spending; there is full employment