Comparing the effect on the monetary base between an open market purchase of government securities from a bank and the same open market operation conducted with the general public,the monetary base
A)increases by a larger amount if the general public sells the securities than if a bank sells the securities.
B)increases by a larger amount if a bank sells the securities than if the general public sells the securities.
C)does not change if it is the general public that sells the securities.
D)increases by the same amount if the general public sells the securities or if a bank sells the securities.
E)decreases by the same amount if the general public sells the securities or if a bank sells the securities.

Question

Quizplus · Accepted Answer

The monetary base increases by the same amount regardless of whether the securities are purchased from a bank or the general public, as both transactions involve the central bank injecting the same amount of reserves into the banking system.

Comparing the Effect on the Monetary Base Between an Open