The Fed controls the monetary base by manipulating its balance sheet with moneta

Question

The Fed controls the monetary base by manipulating its balance sheet with monetary policy tools: open-market operations and discount loans. The following questions consider how these tools affect the monetary base.

Which of the following causes a decrease in the monetary base?
A.   The nonbank public's deposit of currency into checking accounts B.   An open-market purchase C.   A decrease in the discount rate D.   An increase in "float"--i.e., the amount of funds contained in the checks presented for payment E.   An increase in Treasury deposits with the Fed, since the Treasury withdraws the money from the banking system to deposit with the Fed, thereby decreasing bank reserves.

Explanation / Answer

An increase in Treasury deposits with the Fed, since the Treasury withdraws the money from the banking system to deposit with the Fed, thereby decreasing bank reserves.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.