Question

When an individual sells a $100 bond to the Fed, she may either deposit the check she receives or cash it for currency. How do reserves, currency in circulation and monetary base change in the banking system?

Answer 1

The reserve currency in the circulation and in the monetary base have high-powered and the money increases

Explanation:

When she deposit it for the check then it is called as the currency is left for circulation in the bank and hence it is called as circulation and if she receives the currency then it is called as the monetary

So in both the cases the value of the currency is increased that is if she deposits it she will have a high power and the bank will deposit the interest amount every month or annually if she receives it in cash then the value of the money increases