When the Fed buys $100 billion of Treasury bills from commercial banks, the monetary base increases by $100 billion.

Question

Quizplus · Accepted Answer

When the Fed buys Treasury bills from commercial banks, it credits the banks' reserve accounts at the Fed, increasing the monetary base by the amount of the purchase. Therefore, if the Fed buys $100 billion of Treasury bills, the monetary base increases by $100 billion.

When the Fed Buys $100 Billion of Treasury Bills from Commercial