Fed doubles monetary base During the fourth quarter of 2008, the Fed doubled the monetary base but the quantity of money (M2) increased by only 5 percent. Why did M2 not increase by much more than 5 percent? What would have happened to the quantity of M2 if the Fed had kept the monetary base constant? The quantity of MZ did not increase by much more than 5 percent because A. the desired reserve ratio increased B. interest rates rose O C. the desired reserve ratio decreased O D. the currency drain ratio decreased O E. the quantity of M1 decreased , which decreased the money multiplier. If the Fed had kept the monetary base constant when the money multiplier decreased, the quantity of M2 would have O A. become equal to the monetary base O B. decreased O C. become equal to the quantity of M1 O D. increased

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