Question 3 2 pts In response to the Great Recession, the Federal Reserve engaged in quantitative
easing. As a consequence, the monetary base rose by nearly 400%, causing some to worry about
inflation. However, during this time the money supply rose by only 110%. What explains this? A
money multiplier greater than 1. A money multiplier equal to 1. A money multiplier smaller than
1. A negative money multiplier.
Solution
Money multiplier = Money supply / monetary base = 110 / 400 = 0.275
A money multiplier smaller than 1.
Question 3 2 pts In response to the Great Recession, the Federal Rese.pdf
1. Question 3 2 pts In response to the Great Recession, the Federal Reserve engaged in quantitative
easing. As a consequence, the monetary base rose by nearly 400%, causing some to worry about
inflation. However, during this time the money supply rose by only 110%. What explains this? A
money multiplier greater than 1. A money multiplier equal to 1. A money multiplier smaller than
1. A negative money multiplier.
Solution
Money multiplier = Money supply / monetary base = 110 / 400 = 0.275
A money multiplier smaller than 1
