A sale of foreign assets by a central bank has the same effect on the monetary base as

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Quizplus · Accepted Answer

An open market sale of government bonds and a sale of foreign assets by a central bank both result in a decrease in the monetary base. This is because when the central bank sells government bonds or foreign assets, it is reducing the amount of reserves held by banks, which decreases the money supply and thus the monetary base. Option A and B are incorrect because a decrease in the discount rate or required reserve ratio would increase the money supply and thus the monetary base. Option D is incorrect because an open market purchase of government bonds would increase the money supply and thus the monetary base.

A Sale of Foreign Assets by a Central Bank Has