Open-market operations change the ______; changes in interest rate paid on reserves change the ______; and changes in the discount rate change the ______.
A) monetary base; monetary base; monetary base
B) money multiplier; money multiplier; money multiplier
C) monetary base; money multiplier; monetary base
D) money multiplier; monetary base; money multiplier

Question

Quizplus · Accepted Answer

Open-market operations affect the monetary base, as it involves the buying and selling of government securities by the central bank, which influences the level of reserves in the banking system. Changes in interest rates paid on reserves affect the money multiplier, as it determines the incentive for banks to hold reserves and make loans. Changes in the discount rate affect the monetary base, as it is the rate at which banks can borrow from the central bank, which affects the level of reserves in the system.

Open-Market Operations Change the ______; Changes in Interest Rate Paid