Which of the following best explains why the decrease in the price level did not

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Which of the following best explains why the decrease in the price level did not increase the real money stock during the Great Depression in the US?

Which of the following best explains why the decrease in the price level did not increase the real money stock during the Great Depression in the United States? A roughly equal decrease in nominal money, due to business failures and an increase in the money multiplier, kept the real money approximately constant. The Fed was forced to let the money multiplier decrease and hence the nominal money because of the decline in output and the interest rate. A roughly equal decrease in nominal money, due to bank failures and a decrease in the money multiplier, kept the real money approximately constant. The real money stock, M/P, did not increase because M also decreased due to a decrease in output and demand for money.

Explanation / Answer

c

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