Central Bank and Money Supply Exam Questions Chapter 17

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1) Contrast the Fed's actions in response to the terrorist attacks of September 2001 and its response to the financial crisis of the Great Depression. Specifically, why was the Fed successful at dealing with the crisis in 2001 and not as successful with the crisis of the early 1930s?

2) Why do some economists credit the Fed with having prevented another depression in the Financial Crisis of 2007–09? How was dramatic inflation avoided?

3) The assets that appear on the central bank's balance sheet include the category of loans. Who are central banks lending to and are these loans associated with the central bank functioning as the government's bank? Explain.

4) The Federal Reserve's balance sheet includes an item labeled currency. Is this an asset or a liability of the Fed, and does it include all currency that is printed? Explain.

5) If the central banks of most countries do not set the exchange rates, why do they hold foreign exchange as one of their assets?

6) Why do most central banks publish their balance sheets so frequently?

7) Suppose a student writes a check in the amount of $300 to the college bookstore for textbooks. Discuss briefly the impact on the student's balance sheet, their bank's balance sheet, and the balance sheet of the Fed.

8) Explain the impact on the Fed's balance sheet from a $10 million open market purchase of U.S. Treasury Securities. Be sure to identify which categories of assets and liabilities change and by what amounts.

9) Follow a $1 billion purchase of U.S. Treasury bonds by the Fed from commercial banks. Discuss the changes that occur to the balance sheet of the banking system and the balance sheet of the Fed.

10) If the Fed sells euros valued at $100 million to commercial banks, will this change the size of the Fed's liabilities and assets? Explain.

11) Given the prevalence of electronic payment mechanisms like credit cards and debit cards and the safety of checks, why is the amount of currency in the hands of the public increasing?

12) What are two economic benefits for keeping paper money around instead of eliminating it and replacing it with electronic money?

13) The Treasury usually requires most businesses to regularly deposit taxes withheld from employees into accounts at designated commercial banks. On a regular basis, the funds in these accounts are transferred to the Treasury's account at the Fed. Discuss what is happening to the balance sheet of the banking system as the businesses are making deposits and these tax accounts are increasing. What happens to the banking system's balance sheet when the funds are transferred to the Fed?

14) You receive a $1,000 gift from your grandmother when you graduate from college. Your grandmother withdrew the $1,000 from her checking account and gave you ten $100 bills. You deposit the ten bills into your checking account. Discuss the impact of these transactions on your grandmother's balance sheet, your balance sheet, and the Fed's balance sheet.

15) In “normal times,” when the economy is expanding and absent any financial strains, what is the appropriate mix of the Fed’s asset holdings?

16) What happens to the monetary base if people, fearing a bank run, convert their checking deposits into currency holdings?

17) How far below zero can nominal interest rates go? What would happen if policymakers tried to simulate the economy by reducing interest rates below the effective lower bound (ELB) threshold? What would that mean for the economy?

18) Suppose the required reserve rate set by the Fed is 10 percent of all checkable deposits. A bank sells $1 million of U.S. Treasury securities it owns to the Fed. Describe what this transaction does to the bank's total reserves, its required reserves, and its excess reserves.

19) If reserves pay interest below the market federal funds rate, why would a bank hold any excess reserves?

20) When people travel during the summer and use prepaid travel cards to access some of their checking account deposits, how does this affect the monetary base?

21) Why is it more correct to say that the Fed (the central bank) controls the monetary base than to say it controls the amount of reserves?

22) If we assume the required reserve rate is 10 percent (0.1), the public does not change their currency holdings, and banks do not hold any excess reserves, what will be the change in deposits resulting from a $150 million open market purchase by the Fed?

23) <p>Why would it be correct to say that, if we assume that people do not change their currency holdings and banks do not hold any excess reserves, the equationreally could be stated as?

24) You are given the following information: Total banking system reserves equal $58.65 billion. The total banking system checkable deposits subject to reserve requirements are $510 billion. The required reserves are $51 billion. What is the required reserve rate, and what is the excess reserve rate?

25) What would be the amount of deposits D, given that the monetary base MB = $750 billion, the required reserve rate ( r_D) = 0.1, the excess reserve rate ( r_E) = 0.005, and non-bank currency to deposits ( C/ D) = 1.2?

26) You are given the following information: Total Reserves ( R) in the banking system amount to $48 billion, of which $45.8 billion are required. Currency in the hands of the public amounts to $692.5 billion while checkable deposits amount to $650 billion. Calculate the money multiplier.

27) Who controls the impact of a change in the money supply on the economy? Use the formula for the money multiplier to answer this question.

28) Fill in the empty cells in the following table to summarize the factors affecting the quantity of money in the economy. Then, explain your reasoning.

29) What was the main reason the Fed stopped announcing growth targets for money aggregates in the early 2000s?

30) During the financial crisis of 2007–2009, the deposit expansion multiplier plummeted to a fraction of its normal value. Why?

31) Explain why the Fed making more discount loans to banks, or an open market purchase, or an increase in foreign exchange reserves all have the same effect on its balance sheet. What is that effect on the monetary base?

32) Considering changes to the monetary base, are discount loans and federal funds borrowing equivalent? Explain.

33) On the morning of September 11, 2001, terrorists attacked the United States and caused enormous disruptions. In assessing the performance of the Fed and the impact on financial systems in hindsight, this is a story of

A) inaction by the Federal Reserve.
B) great success by the Federal Reserve.
C) appropriate actions taken too late by the Federal Reserve.
D) catastrophic outcomes due to a lack of backup systems at the Federal Reserve.

34) The Federal Reserve failed to keep the financial system operational during the 1930s because it

A) kept the discount window open.
B) provided too much liquidity to banks.
C) failed to recognize the link between changes in the Fed’s balance sheet and the growth rate of money.
D) failed to supply enough cash to the economy, and commercial bank accounts at the Fed plummeted.

35) The collapse of the Thai currency, the baht, was partially due to

A) inaction by the Federal Reserve.
B) actions taken by the European Central Bank.
C) information kept hidden by the central bank of Thailand.
D) central bankers and the Minister of Finance publishing too much information.

36) Each of the following items would appear as assets on the central bank's balance sheet except which one?

A) loans
B) securities
C) foreign exchange reserves
D) currency

37) Which one of the following is a liability on the central bank's balance sheet?

A) loans
B) currency
C) securities
D) foreign exchange reserves

38) Each of the following items would appear as liabilities on the central bank's balance sheet except which one?

A) loans
B) currency
C) the government's account
D) accounts of the commercial banks

39) The main asset held by a central bank in its role as the bankers’ bank is

A) foreign exchange reserves.
B) currency.
C) loans.
D) securities.

40) A liability of the central bank in functioning as the bankers' bank is

A) accounts of commercial banks.
B) securities.
C) loans.
D) currency.

41) On the Federal Reserve's balance sheet, securities would include

A) private and public debt.
B) mainly U.S. Treasury and municipal bonds.
C) U.S. Treasury securities.
D) bonds issued by commercial banks.

42) If the Federal Reserve is to be independent, then the quantity of securities it purchases must be determined by

A) the Federal Reserve itself.
B) Congress.
C) the amount the public does not want to purchase at the going price.
D) the Treasury.

43) A central bank holds foreign exchange reserves for

A) diversification purposes.
B) foreign exchange interventions.
C) safekeeping.
D) diversification and safekeeping.

44) The quantity of securities held by the Federal Reserve is controlled through

A) the U.S. Treasury.
B) the Fed's annual budget.
C) open market operations.
D) the purchases made by the regional Reserve Banks.

45) In the United States, loans made by Federal Reserve to banks are

A) discount loans.
B) reserves.
C) discount loans and reserves.
D) discount loans and foreign exchange reserves.

46) Discount loans are

A) initiated by the Federal Reserve.
B) made when banks need relatively small amounts of cash for the long term.
C) made when banks need relatively large amounts of cash for the long term.
D) made when banks need relatively small amounts of cash for the short term.

47) Bonds issued by a foreign government in its own currency would

A) not be held by the Fed.
B) be held by the Fed as part of its securities.
C) be held by the Fed as part of its foreign exchange reserves.
D) be held by the Fed as part of its loans.

48) Bonds issued by the U.S. Treasury would

A) not be held by the Fed.
B) be held by the Fed as part of its securities.
C) be held by the Fed as part of its foreign exchange reserves.
D) be held by the Fed as part of its loans.

49) Liabilities of commercial banks show up on the Fed's balance sheet as part of its

A) liabilities.
B) securities.
C) foreign exchange reserves.
D) loans.

50) As a portion of total assets measured in billions of dollars, the largest asset on the Fed's balance sheet is

A) gold.
B) securities.
C) foreign exchange reserves.
D) loans.

51) Gold is

A) used to back U.S. currency.
B) extremely important as an asset for the Fed.
C) a small portion of the Fed's assets.
D) very important for monetary policy in the United States.

52) As a portion of total assets measured in billions of dollars, the smallest asset on the Fed's balance sheet is

A) gold.
B) securities.
C) foreign exchange reserves.
D) loans.

53) Reserves are

A) assets of the central bank and liabilities of the U.S. Treasury.
B) assets of the central bank and liabilities of commercial banks.
C) liabilities of commercial banks and assets of the U.S. Treasury.
D) assets of commercial banks and liabilities of the central bank.

54) Reserves are

A) assets of the central bank and liabilities of commercial banks.
B) assets of commercial banks and liabilities of the central bank.
C) liabilities of commercial and central banks.
D) assets and liabilities for the central bank.

55) Vault cash is

A) equal to the total amount of reserves and is an asset of the central bank.
B) not reserves but is a liability of the central bank.
C) a part of reserves and an asset of commercial banks.
D) not reserves but is an asset of central banks.

56) Vault cash is not included in the central bank's liability category of currency because

A) only non-bank currency is in the liability category of currency.
B) it really is only electronic funds.
C) it is in the asset category of reserves.
D) it is the liability of the U.S. Treasury.

57) Vault cash is not included in the central bank's liability category of currency because it

A) counts as currency.
B) is not part of reserves.
C) is not available to meet depositors’ withdrawal demands.
D) serves the insurance function for which reserves are designed.

58) Monetary policy operations for central banks are run through changes in which liability category?

A) government's accounts
B) currency
C) reserves
D) gold

59) Most responsible central banks publish their balance sheet

A) weekly.
B) monthly.
C) quarterly.
D) annually.

60) The experience of the Marcos presidency in the Philippines in 1986 showed that

A) publishing central bank balance sheets ensures their accuracy.
B) desperation is positively correlated with sound monetary policy.
C) transparency is unimportant for building citizens’ trust in the central bank.
D) it is important to keep the central bank independent from political pressure.

61) The monetary base is the sum of

A) reserves and M2.
B) M1 and reserves.
C) currency in the hands of the public, reserves, and M1.
D) currency in the hands of the public and reserves in the banking system.

62) The monetary base is the sum of

A) reserves and currency in the hands of the public.
B) reserves and M2.
C) currency in the hands of the public and M2.
D) currency in the hands of the public M1.

63) The monetary base is also known as

A) M1.
B) M2.
C) high-powered money.
D) free reserves.

64) In dollar amounts,

A) the monetary base is larger than M2, and M1 is less than M2.
B) M1 is smaller than the monetary base, and M2 is larger than both.
C) the monetary base is larger than M1 and M2.
D) the monetary base is smaller than M1, and M2 is larger than M1.

65) One trait a central bank has over other businesses, including banks, is that it

A) receives all of its funding from the government.
B) can control the size of its balance sheet.
C) doesn't have stockholders.
D) doesn't have a board of directors.

66) Suppose the Federal Reserve purchases a U.S. Treasury bond for $1 million by writing a check. When the check returns, the Fed's balance sheet will show

A) an increase in assets and a decrease in liabilities of $1 million.
B) only an increase in assets of $1 million.
C) only an increase in liabilities of $1million.
D) an increase in assets and liabilities of $1 million.

67) When a business purchases a $25,000 computer system by writing a check, the business's balance sheet will

A) show an increase in assets and liabilities of $25,000.
B) only show an increase in assets of $25,000.
C) only show an increase in liabilities of $25,000.
D) still show the same total amount of assets as before the purchase.

68) When a business purchases a $50,000 computer system by writing a check, the business's balance sheet will

A) only show an increase in liabilities of $50,000.
B) show an increase in assets and liabilities for $50,000.
C) not reflect any increase in assets or liabilities, only a change in the composition of assets.
D) only show an increase in assets of $50,000.

69) A central bank's purchase of securities made by writing checks on itself will

A) decrease the size of its balance sheet.
B) have no impact at all on the balance sheet.
C) increase the size of their balance sheet.
D) only change the composition of its assets.

70) A central bank's sale of securities from its portfolio will

A) decrease the size of its balance sheet.
B) have no impact at all on the balance sheet.
C) only change the composition of its liabilities.
D) only change the composition of its assets.

71) Consider a $2 billion open market purchase of U.S. Treasury securities by the Federal Reserve. The Fed's balance sheet will show

A) only an increase in the asset of securities of $2 billion.
B) only show an increase in the liability of reserves of $2 billion.
C) no change in the size of the balance sheet, just the composition of assets will change from cash to securities.
D) an increase in the asset category of securities and the liability category of reserves by $2 billion.

72) Consider a $2 billion open market purchase of U.S. Treasury securities by the Federal Reserve. The banking system's balance sheet will specifically show

A) only an increase in liabilities of $2 billion.
B) only a decrease in assets of $2 billion.
C) no net change in assets or liabilities, only a change in the composition of assets with securities decreasing and reserves increasing by $2 billion, respectively.
D) no net change in assets or liabilities, only a change in the composition of assets with securities increasing and reserves decreasing by $2 billion, respectively.

73) An open market sale of U.S. Treasury securities by the Fed will cause the Fed's balance sheet to show

A) a decrease in the asset of securities and a decrease in the liability of reserves.
B) an increase in the liability of reserves.
C) no change in the size of the balance sheet, just the composition of assets will change from securities to cash.
D) an increase in the asset category of securities and the liability category of reserves.

74) An open market sale of U.S. Treasury securities by the Fed will cause the banking system's balance sheet to show

A) only an increase in liabilities.
B) only a decrease in assets.
C) no net change in assets or liabilities, only a change in the composition of assets with securities decreasing and reserves increasing.
D) no net change in assets or liabilities, only a change in the composition of assets with securities increasing and reserves decreasing.

75) The Fed purchases German bonds from commercial banks. Which one of the following best describes the impact on the Fed's and the banking system's balance sheets resulting from this transaction?

A) The Fed's assets and liabilities increase. The banking system’s assets and liabilities decrease.
B) The Fed's assets and liabilities increase. For the banking system, the value of assets and liabilities do not change, only the composition of assets changes.
C) The Fed's assets and liabilities do not change, only the compositions of the assets change. For the banking system, assets and liabilities increase.
D) The Fed's assets increase and its liabilities decrease. For the banking system, the value of assets and liabilities do not change, only the composition of assets changes.

76) The Fed sells German bonds to commercial banks. Which one of the following best describes the impact on the Fed's and the banking system's balance sheets resulting from this transaction?

A) The Fed's assets and liabilities increase. The banking system’s assets and liabilities decrease.
B) The Fed's assets and liabilities increase. For the banking system, the value of assets and liabilities do not change, only the composition of assets changes.
C) The Fed's assets and liabilities do not change, only the compositions of the assets change. For the banking system, assets and liabilities increase.
D) The Fed's assets and liabilities decrease. For the banking system, the value of assets and liabilities do not change, only the composition of assets changes.

77) To obtain a discount loan from the Fed, a commercial bank must

A) show that it will fail if it does not obtain the loan.
B) prove that the loan will be used to make loans.
C) provide collateral.
D) agree to more frequent examinations.

78) When the Fed makes a discount loan, the impact on the Fed's balance sheet will reflect

A) no change in liabilities but an increase in assets.
B) a decrease in assets and liabilities.
C) an increase in assets and liabilities.
D) an increase in assets and a decrease in liabilities.

79) When the Fed makes a discount loan, the impact on the banking system's balance sheet is

A) an increase in liabilities with no change in assets.
B) an increase in assets and a decrease in liabilities.
C) a decrease in assets and an increase in liabilities.
D) the same as that of an open market purchase.

80) When the Fed makes a discount loan, the impact on the banking system's balance sheet will reflect

A) an increase in liabilities with no change in assets.
B) an increase in assets and a decrease in liabilities.
C) a decrease in assets and an increase in liabilities.
D) an increase in assets and liabilities.

81) During the 2007–2009 financial crisis, which one of the following temporarily became the largest component of assets on the Fed’s balance sheet?

A) foreign exchange reserves
B) U.S. Treasury securities
C) mortgage-backed securities
D) loans

82) Which of the following combinations each has the same impact on the Fed's balance sheet?

A) an open market purchase and an increase in loans by the Fed to banks
B) an open market sale and an increase in foreign exchange reserves
C) an open market purchase and a decrease in foreign exchange reserves
D) an increase in loans by the Fed to banks and a decrease in foreign exchange reserves

83) Mary decides to withdraw $500 out of her checking account. The impact of this transaction on the banking system's balance sheet will be to

A) only reduce checkable deposits by $500.
B) increase reserves and reduce checkable deposits by $500, respectively.
C) only reduce reserves by the required reserve rate times $500.
D) decrease reserves and checkable deposits by $500, respectively.

84) Tom decides to withdraw $300 out of his checking account. The impact of this transaction on the Fed's balance sheet will be

A) no change in total assets or total liabilities, but an increase in the liability of currency and a decrease in the liability of reserves by $300, respectively.
B) no change in total assets but the liability of currency increases by $300.
C) total assets decrease by $300 and the liability of currency increases by $300.
D) no change in either total assets or total liabilities.

85) When an individual withdraws funds from a checking account the bank's balance sheet

A) shrinks, and the size of the Fed's balance sheet is not affected.
B) shrinks and so does the Fed's balance sheet.
C) shrinks, and the size of the Fed's balance sheet increases.
D) stays the same in size, and the size of the Fed's balance sheet shrinks.

86) Harry gets $1,000 in currency from his grandfather when he graduates from college. He deposits these funds into his checking account. Considering Harry's personal balance sheet, his assets

A) increased by $1,000 when he deposited the $1,000 into his checking account.
B) increased when he received the $1,000 in currency from his grandfather.
C) and liabilities increased by $1,000 when he deposited the funds into his checking account.
D) increased by $1,000 and his liabilities decreased by $1,000 when he deposited the funds into his checking account.

87) Harry gets $1,000 in currency from his grandfather when he graduates from college. He deposits these funds into his checking account. What is the impact of Harry’s deposit on the monetary base? The monetary base

A) did not change.
B) increased by $1,000.
C) decreased by $1,000.
D) increased by more than $1,000.

88) Over the two-year period during which the financial crisis occurred, the amount of assets in the Federal Reserve balance sheet increased by

A) 2.5 times.
B) 3 times.
C) 4.5 times.
D) 6 times.

89) If Bank A sells a $100,000 U.S. Treasury bond to the Fed, Bank A's required reserves will

A) not change.
B) increase by $100,000.
C) increase but by less than $100,000.
D) decrease.

90) If Bank A sells a $100,000 U.S. Treasury bond to the Fed, Bank A's total reserves will

A) increase by $100,000.
B) increase by less than $100,000.
C) decrease.
D) not change.

91) If Bank A sells a $100,000 U.S. Treasury bond to the Fed, Bank A's excess reserves will

A) increase by less than $100,000.
B) not change.
C) decrease by less than $100,000.
D) increase by $100,000.

92) The most a bank could lend at any time without altering its assets is an amount equal to its

A) checkable deposits.
B) reserves.
C) excess reserves.
D) net worth.

93) Bank A has checkable deposits of $100 million, vault cash equaling $1 million and deposits at the Fed equaling $14 million. If the required reserve rate is ten percent, what is the maximum amount Bank A could lend?

A) $85 million
B) $15 million
C) $14 million
D) $5 million

94) Bank A has checkable deposits of $140 million, vault cash equaling $1 million, and deposits at the Fed equaling $14 million. If the required reserve rate is 10 percent, what is the amount of excess reserves Bank A is holding?

A) It does not have any excess reserves.
B) $15 million
C) $2 million
D) $1 million

95) A customer of Bank A writes a $20,000 check for a new car, which the car dealer deposits in his bank, Bank B. How does this transaction change reserves at Bank A and Bank B?

A) Bank A's reserves decrease by $20,000 and Bank B's reserves increase by $20,000.
B) Neither Bank A's nor B's reserves will change.
C) Bank B's reserves will decrease and Bank A's reserves will increase by $20,000.
D) Banks A's reserves will decrease by the required reserve rate times $20,000 and Banks B's reserves will increase by (1 – required reserve rate) times $20,000.

96) If the required reserve rate is 10 percent and banks do not hold any excess reserves and there are no changes in currency holdings, a $1 million open market purchase by the Fed will result in deposit creation of

A) $9 million.
B) $90 million.
C) $10 million.
D) $900,000.

97) If the required reserve rate is expressed by r_D and deposits by D, the formula for calculating the amount of required reserves is

A) (1/r_D )D.
B) 1/r_D.
C) (r_D )D.
D) D/r_D.

98) If required reserves are expressed by RR, the required reserve rate by r_D, and deposits by D, the simple deposit expansion multiplier is expressed as

A) R_D × D.
B) (1/r_D )D.
C) RR × D.
D) 1/r_D.

99) If the Fed were to increase the required reserve rate from 10 percent to 20 percent, the simple deposit expansion multiplier would

A) double.
B) increase by 10 percent.
C) decrease by a factor of ten.
D) be half as large as it was before the increase.

100) If the Fed were to decrease the required reserve rate from 10 percent to 5 percent, the simple deposit expansion multiplier would

A) double.
B) decrease by 5 percent.
C) increase by a factor of five.
D) be half as large as it was before the reduction.

101) If the required reserve rate is ten percent and banks do not hold any excess reserves and there are no changes in currency holdings, a $1 million open market purchase by the Fed will result in which change in loans?

A) no change
B) a decrease of $1 million
C) an increase of $10 million
D) an increase of $1 million

102) If we focus on the banking system and assume no change in the public's currency holdings, a loss of reserves by any one bank must

A) equal the loss of reserves by the entire system.
B) be equal to the net loss of reserves for the banking system.
C) result in a multiple loss to the banking system.
D) result in no change in reserves for the banking system.

103) If we assume a 10 percent required reserve rate, banks hold no excess reserves, and there is no change in currency holdings, an open market sale of $5 million of U.S. Treasury securities by the Fed will result in deposits

A) decreasing by $50 million.
B) increasing by $5 million.
C) increasing by $50 million.
D) not changing.

104) The simple deposit expansion multiplier is really too simple for understanding the link between changes in a central bank's balance sheet and the quantity of money in the economy because it

A) ignores how central banks could change their balance sheet.
B) assumes banks hold excess reserves.
C) ignores the fact people might change their currency holdings.
D) assumes there are no changes in vault cash.

105) Assume that the required reserve rate is 10 percent, banks want to hold excess reserves in an amount that equals 3 percent of deposits, and the public withdraws 10 percent of every deposit in cash. An open market purchase of $1 million by the Fed will see banking system deposits increase by

A) more than $1 million but less than $10 million.
B) exactly $1 million.
C) less than $1 million.
D) more than $10 million but less than $20 million.

106) If people increase their currency holdings, all else the same, the monetary base

A) does not change but the quantity of M2 will decrease.
B) increases as does the quantity of M2.
C) decreases as does the quantity of M2.
D) does not change and neither does M2.

107) If there were an increase in the number of bank failures, we should expect the amount of excess reserves in the banking system to

A) decrease.
B) increase.
C) not change.
D) decrease since failing banks lost theirs.

108) If M = quantity of money, m = money multiplier, MB = monetary base, C = currency, D = deposits, R = reserves, RR = required reserves, and ER = excess reserves, then C + R would equal

A) M.
B) R.
C) MB.
D) ER.

109) If M = quantity of money, m = money multiplier, MB = monetary base, C = currency, D = deposits, R = reserves, RR = required reserves, and ER = excess reserves, then RR would equal

A) MB.
B) D – C.
C) M/MB.
D) R – ER.

110) If M = quantity of money, m = money multiplier, MB = monetary base, C = currency, D = deposits, R = reserves, RR = required reserves, and ER = excess reserves, then m would equal

A) R/ER.
B) M/MB.
C) C + D.
D) D – C

111) The money multiplier is much lower today than it was 25 years ago because

A) people are holding less currency today.
B) the currency-to-deposit ratio is much higher today.
C) credit cards are more widely used.
D) there is less currency available today.

112) During the Great Depression, the monetary base in the United States

A) decreased significantly.
B) increased.
C) remained constant.
D) was highly erratic.

113) One thing the Fed has learned over the past 25 years is that

A) the money multiplier is fairly constant no matter what changes are made to the monetary base.
B) the money multiplier is unstable over time.
C) it should focus its attention on targeting M2.
D) the money multiplier has a trend rate of growth that is fairly constant.

114) During the 1990s, the money multipliers for M1 and M2

A) decreased.
B) remained fairly constant even though the economy grew.
C) the M1 multiplier decreased while the M2 multiplier increased dramatically.
D) increased dramatically as the economy grew.