2. Money Multiplier

Go to the St. Louis Federal Reserve FRED database, and find data on the M1 Money Stock (M1SL), and the Monetary Base (BOGMBASE)

a. Calculate the value of the money multiplier using the most recent data available. (Note that M1 and Monetary Base are measured in different units.)

b. Based on your answer to part (1), how much would a $100 million open market purchase of securities affect the M1 money supply today?

c. Research for the current required reserve ratio. What is the current required reserve ratio rr set by the Fed? Why?

d. Calculate the value of the money multiplier using data from March 2010. How has the money multiplier changed from during the 2009 financial crisis? What factors caused the change?