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When a Bank Borrows Reserves from the Federal Reserve

Question 2

Multiple Choice

When a bank borrows reserves from the Federal Reserve


A) the monetary base remains unchanged because no new reserves are created.
B) the Fed may choose to nullify the effect on the monetary base through an open market sale.
C) the monetary base increased as new reserves enter the banking system.
D) both b and c.
E) none of the above.

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