When the Federal Reserve sells a government bond to a bank,reserves in the banking system ________ and the monetary base ________,everything else held constant.

Question

Quizplus · Accepted Answer

When the Federal Reserve sells a government bond to a bank, the bank pays for the bond by reducing its reserves, leading to a decrease in reserves in the banking system. Consequently, the monetary base also decreases because it includes the reserves held by banks.

When the Federal Reserve Sells a Government Bond to a Bank,reserves