Suppose,while cleaning out its closets,a worker at the Federal Reserve bank branch in Memphis discovers a painting of Elvis (medium: acrylic on velvet)that used to grace the walls of the conference room. Suppose further that,at a public auction,the bank sells the painting for $19.95. This sale will cause ________ in the monetary base,everything else held constant.

Question

Quizplus · Accepted Answer

The sale of the painting for $19.95 would result in a decrease in the monetary base by $19.95 because the Federal Reserve is exchanging an asset (the painting) for cash, which reduces the amount of currency in circulation.

Suppose,while Cleaning Out Its Closets,a Worker at the Federal Reserve