If the Fed injects reserves into the banking system and they are held as excess reserves,then the monetary base ________ and the money supply ________.

Question

Quizplus · Accepted Answer

When the Fed injects reserves into the banking system, the monetary base increases because the total amount of reserves in the banking system has increased. However, if these reserves are held as excess reserves (meaning banks choose not to lend them out), the money supply remains unchanged because the additional reserves do not translate into new loans and deposits, which would otherwise increase the money supply.

If the Fed Injects Reserves into the Banking System and They