Suppose that the Bank of Japan buys yen-denominated assets with U.S. dollar assets. Everything else held constant,this transaction will cause ________ in the foreign assets held by the Federal Reserve and ________ in the U.S. monetary base.

Question

Quizplus · Accepted Answer

When the Bank of Japan buys yen-denominated assets with U.S. dollar assets, it reduces the foreign assets held by the Federal Reserve. This transaction also decreases the U.S. monetary base because it involves the exchange of U.S. dollars for foreign assets, effectively reducing the amount of U.S. dollars in circulation.

Suppose That the Bank of Japan Buys Yen-Denominated Assets with U.S