When the Reserve Bank engages in open market operations to buy securities
A) the monetary base decreases by the amount of the open market purchase.
B) the monetary base increases by more than the amount of the open market purchase.
C) the monetary base increases by the amount of the open market purchase.
D) the monetary base increases by less than the amount of the open market purchase.
E) None of the above.

Question

Quizplus · Accepted Answer

When the Reserve Bank buys securities in open market operations, it injects money into the banking system, increasing the monetary base by the amount of the purchase.

When the Reserve Bank Engages in Open Market Operations to Buy