Assume the desired reserve ratio is 10 percent, banks loan all excess reserves and the currency Drain is zero. If the Fed sells $100 million of U.S. government securities to Boise Bank, the monetary Base increases by

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The Fed's sale of securities to Boise Bank reduces the bank's excess reserves by $100 million. Since banks loan out all excess reserves, this reduction in excess reserves leads to a decrease in the monetary base of $100 million.

Assume the Desired Reserve Ratio Is 10 Percent, Banks Loan