18) During the early 1930s in the U.S. the M2 money supply decreased significant

Question

18) During the early 1930s in the U.S. the M2 money supply decreased significantly (helping to make the Great Depression worse). This decrease was caused by which of the following? O a decrease in the monetary base O an decrease in the money multiplier both of the above neither of the above If the required reserve ratio is 0.12 (12%), the desired excess reserve-to-deposit ratio is 0.03 (3%), and the desired currency-to-deposit ratio is 0.35 (35%), what is the value of the money multiplier? 19) O 10 8.5 2.7 1.69 none of the above The quantity of securities held by the Federal Reserve is controlled through: 20) (2pts) the U.S. Treasury's auction of T-bills each week open-market operations None of the above Odiscount lending O All of the above

Explanation / Answer

18) c) Both of the above. As there is a decrease in the monetary base there is also less supply of money in circulation with the public and the commercial banks. The total amount of currency in circulation decreases which also decreases the M2 money supply. Money multiplier equals the ratio of increase or decrease of the money supply, hence when it decreases the money supply also decreases.

20) C) open market operations

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