Ben Bernanke is known as a student of the Great Depression so if anyone knows what happened and what went wrong during the Great Depression, it would be Ben Bernanke. In this problem, we are going to see if the Fed "learned their lesson."
Money Multiplier (M1) 12/06/2006: 1.640 ; 12/14/2011: 0.821
Monetary Base 12/06/2006: 1.665 ; 12/14/2011: 2631.332
We know that M = MM X MB so that money supply is influenced by shocks to the money multiplier as well as through shocks to the monetary base (aka, open market operations). Using the observations 12/06/2006 and 12/14/2011. find out the percent change in the MM as well as the percent change in the MB during this period. Then find out the percent change in the money supply during this same five year period. Did the Fed learn their lesson?? Why or why not