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Even though the rate of growth in the monetary base decelerated — and the money multiplier decreased for the most part — from 1993-96 in the United States, the growth rate of the M2 money stock still progressively increased. How is this possible?

enter image description hereYou can see a steep drop in the money multiplier from '93-'96enter image description here

References:

https://fred.stlouisfed.org/series/BASE

https://www.alt-m.org/2016/07/21/why-the-money-multiplier-remains-so-low/

https://fred.stlouisfed.org/series/M2

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  • $\begingroup$ Can you add a reference to back up your claim? A graph, a link, or both if possible. This might help to settle into a common definition and source too. $\endgroup$ – luchonacho Jul 26 '17 at 11:22
  • $\begingroup$ It seems like the question you are asking is if M2 grew and the monetary base declined then how the heck did the money multiplier = $\frac{M2}{base}$ also decline (over your period of interest). Is this correct?If so, my first guess is to check how you generated those graphs. They have percentage change on the y-axis. Maybe those are absolute changes and don't reflect directionality? $\endgroup$ – 123 Jul 27 '17 at 11:53
  • $\begingroup$ My question is that if the rate of growth in the monetary base slowed down over the time period, and the money multiplier decreased, then how can the growth rate of the M2 stock speed up as it did? $\endgroup$ – Ulysses Li Jul 27 '17 at 23:49

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