Financial Management

Prepare a brief report (1-2 pages)
(Last names M-N) Figure 17.11 shows a sharp decline of the M1 money multiplier in 2008. What caused the
drop? Using the indicators for currency (FRED code: CURRENCY), total reserve balances maintained (FRED
code: RESBALNS), reserve balances required (FRED code: RESBALREQ), and checkable deposits (FRED
code: TCDSL), plot since 2000 the currency-todeposit ratio and the excess reserve-to-deposit-ratio. Which one
caused the M1 money multiplierto plunge? (Hint: To estimate excess reserves, see footnote 8. Divide
RESBALREQ by 1000 to convert the units to billions of dollars.)