When the Reserve Bank buys $10 million of securities from a bank,the
A)money supply decreases.
B)monetary base increases.
C)required reserve ratio decreases.
D)bank's reserves decrease.
E)bank is risking its depositors' money.

Question

Quizplus · Accepted Answer

When the Reserve Bank buys $10 million of securities from a bank, the monetary base increases. This is because the bank's reserves increase by $10 million, which in turn increases the amount of money that can be lent out, leading to an expansion of the money supply.

When the Reserve Bank Buys $10 Million of Securities from a Bank,the