When a bank sells a government bond to the Federal Reserve,reserves in the banking system ________ and the monetary base ________,everything else held constant.

Question

Quizplus · Accepted Answer

When a bank sells a government bond to the Federal Reserve, the reserves in the banking system increase because the Fed pays for the bond by crediting the bank's reserve account. This also increases the monetary base as the reserves are part of the monetary base.

When a Bank Sells a Government Bond to the Federal