Multiple Choice
During the financial crisis of 2008-2010, the Fed increased its purchases of securities and extended more loans, which caused the monetary base to
A) increase rapidly, but the M1 money supply declined because the banks loaned out most of the additional reserves to businesses.
B) fall, but the M1 money supply still expanded rapidly because the banks increased their loans to businesses.
C) increase rapidly, but the M1 money supply expanded at a much slower rate because the banks enlarged their excess reserves.
D) fall, and this led to a sharp decline in the M1 money supply.
Correct Answer:
Verified
Correct Answer:
Verified
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