Which of the following statements is correct?
A)Whenever the federal government runs a budget deficit, the monetary base increases.
B)Whenever the U.S. Treasury sells securities, the monetary base increases.
C)Whenever the Fed sells securities, the monetary base increases.
D)When the Fed helps finance a federal budget deficit, the monetary base increases.

Question

Quizplus · Accepted Answer

When the Fed helps finance a federal budget deficit, it usually does so by purchasing government securities from banks, which increases the banks' reserves and in turn expands the monetary base.

Which of the Following Statements Is Correct