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Wouldn't counting savings as M1 allow the bank to create additional M2 due to fractional reserve?



I don't think so. When the pandemic hit, the fed made the reserve ratio 0% for all accounts, so counting savings accounts as M1 wouldn't really change how much money banks could lend. However, even under normal circumstances (transactional accounts have a reserve ratio of 10%, other accounts have a reserve ratio of 0%) counting savings accounts as transactional (M1) would actually increase the reserve requirement for banks, decreasing the amount they could loan and therefore decreasing M2 overall.




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