Trevor goes to the ATM machine and withdraws $500 in cash. How will this affect the monetary base?
A) The monetary base will increase with the increase in currency in circulation.
B) The monetary base will decline as bank reserves fall.
C) The monetary base will remain unchanged with the increase in the currency in circulation being exactly offset by a decrease in bank reserves.
D) The monetary base will increase by less than the size of the withdrawal as the increase in the currency in circulation will not be completely offset by a decrease in bank reserves.
Correct Answer:
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