Suppose the Reserve Bank buys $50 million worth of securities from ANZ. As a result, the monetary base ________, and the quantity of money will ________ $50 million due to the ________.

Question

Quizplus · Accepted Answer

C) is correct because when the Reserve Bank buys securities, it injects money into the banking system, increasing the monetary base. This action typically results in a larger increase in the overall quantity of money due to the money multiplier effect, where banks can lend out a portion of deposits, creating more money in the economy.

Suppose the Reserve Bank Buys $50 Million Worth of Securities