EBK THE ECONOMICS OF MONEY, BANKING AND
EBK THE ECONOMICS OF MONEY, BANKING AND
5th Edition
ISBN: 9780134734545
Author: Mishkin
Publisher: YUZU
Question
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Chapter 17, Problem 15Q
To determine

How M1 money supply that decreased by 25% in the depression period 1930-33, increased by more than 20% in the financial crisis of 2008-2010, when the money multiplier declined significantly during both the periods.

Concept Introduction:

Money multiplier is the deposits to the required reserves ratio. The number of times, aggregate money supply augments from deposit increase in the commercial banks is given by the money multiplier.

M1 Money supply includes most liquid part of the money supply including physical currencies such as notes, coins, demand drafts, traveler’s checks, checkable deposits.

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