If the Fed increases the monetary base, the

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Quizplus · Accepted Answer

When the Fed increases the monetary base, it injects more money into the system, causing the federal funds rate to fall. This is because there is an increase in the supply of money, which causes lenders to compete for borrowers by lowering interest rates. Additionally, the increase in the monetary base leads to an increase in the quantity of money. Therefore, option B is the best choice. Options A, C, and D are incorrect because the opposite occurs: the federal funds rate falls, the demand for money increases, and the quantity of money increases.

If the Fed Increases the Monetary Base, the