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laiz [17]
3 years ago
10

If the M1 multiplier is 3 and the Fed engages in open-market purchases in the amount of $3 billion, then monetary base will Grou

p of answer choices increase by $3 billion. decline by $9 billion. decline by $3 billion. increase by $9 billion.
Business
1 answer:
zavuch27 [327]3 years ago
7 0

Answer:

A

Explanation:

By definition, open-market operations change the monetary base.

In this exercise, the Fed engages in open-market purchases, which means that the Fed expands the amount of money in the banking system. Therefore the monetary base will increase by an amount equal to the amount of open-market purchases.

So monetary base will increase by $3 billion.

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