A Federal Reserve decision to purchase dollars by selling foreign assets in the foreign exchange market has the same effect as an open market ________ of bonds to ________ the monetary base and the money supply.

Question

Quizplus · Accepted Answer

When the Federal Reserve sells foreign assets in the foreign exchange market, it increases the supply of foreign currency and decreases the supply of dollars. This action results in a decrease in the monetary base and money supply. An open market sale of bonds also decreases the monetary base and money supply, making option A the correct answer.

A Federal Reserve Decision to Purchase Dollars by Selling Foreign