Decide to decrease the ratio of required clearing balances

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Reference no: EM131340670

Suppose the M1 multiplier is currently 1.95 and the M2 multiplier is currently 8.03. If banks decide to decrease the ratio of required clearing balances they hold relative to the amount of transactions deposits they hold, the M1 multiplier will ____ and the M2 multiplier will ____.

a. not change; decrease

b. increase; increase

c. decrease; decrease

d. increase; not change

Reference no: EM131340670

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