The effect of which of the following on the monetary base could be offset with a defensive open market purchase?
A)The Treasury pays for $1 billion in federal government purchases out of its account at the Fed.
B)Federal Reserve float declines.
C)Discount loans increase.
D)The amount of Treasury coins outstanding increases.

Question

Quizplus · Accepted Answer

Federal Reserve float declines means that the amount of checks that have been written by the Fed but have not yet cleared the banking system decreases. This would reduce the monetary base, but the Fed could offset this by buying Treasury securities in the open market, which would increase the monetary base.

The Effect of Which of the Following on the Monetary