To increase the monetary base, the Fed can:
A)conduct open-market purchases.
B)conduct open-market sales.
C)raise the required reserve ratio.
D)lower the required reserve ratio.

Question

Quizplus · Accepted Answer

Conducting open-market purchases means that the Fed is buying securities from banks and other financial institutions, which increases their reserves and therefore expands the monetary base. The other choices, conducting open-market sales or changing the required reserve ratio, would decrease the monetary base.

To Increase the Monetary Base, the Fed Can