Question at position 18 If the Fed injects reserves into the banking system and they are held as excess reserves, then the monetary base ________ and the money supply _________remains unchanged; increases increases; remains unchangedincreases; increases remains unchanged; remains unchanged单项选择题
A
remains unchanged; increases
B
increases; remains unchanged
C
increases; increases
D
remains unchanged; remains unchanged

Question

Question at position 18 If the Fed injects reserves into the banking system and they are held as excess reserves, then the monetary base and the money supply _remains unchanged; increases increases; remains unchangedincreases; increases remains unchanged; remains unchanged单项选择题

A

remains unchanged; increases

B

increases; remains unchanged

C

increases; increases

D

remains unchanged; remains unchanged

BlackTom AI · Accepted Answer

Monetary base rises by the amount of the injected reserves, because reserves are a component of the monetary base.

1) Relevant concepts
- Monetary base (B) = currency in circulation + reserves (required + excess). When the Fed injects reserves, B changes directly.
- Money supply (e.g., M1) depends on deposits and currency created through bank lending via the money multiplier. If banks do not lend (i.e., they hold reserves as excess), the multiplier-driven deposit expansion does not occur.
- Money multiplier (simple intuition): lending turns an initial reserve injection into multiple dollars of deposits; if lending = 0, that chain stops.

2) Step-by-step reasoning
- The Fed provides new reserves to banks (an asset-side injection for banks and liability-side increase in Fed liabilities). Those reserves become part of the monetary base immediately.
- If banks treat the injected reserves as excess reserves and do not make new loans, there is no increase in deposit creation. Deposits (and currency held by the public) — the main components of the money supply — therefore do not rise.

3) Numerical illustration (intermediate steps)
- Suppose initial deposits = $1,000, reserves = $100, monetary base B = currency + 100.
- Fed injects $200 of reserves: reserves become $300 → B increases by $200.
- If banks lend none of the $200 (hold it all as excess), loans do not increase and deposits remain $1,000.
- Money supply (M) remains unchanged because deposits and currency didn’t change.

4) Why the correct answer is correct
- Because reserves are part of the monetary base, any reserve injection increases B immediately. Because banks hold the new reserves as excess and do not lend, the money-creation process is halted, so the broader money supply does not increase.

5) Why other options are incorrect
- “remains unchanged; increases”: wrong because reserves added do change the monetary base.
- “increases; increases”: wrong because this requires banks to lend the reserves, creating deposit expansion; but the premise is they hold them as excess.
- “remains unchanged; remains unchanged”: wrong because the monetary base does change when reserves are injected.

6) Conclusion
The monetary base increases and the money supply remains unchanged, matching the provided answer: increases; remains unchanged.

Question at position 18 If the Fed injects reserves into the banking system and they are held as excess reserves, then the monetary base and the money supply _remains unchanged; increases increases; remains unchangedincreases; increases remains unchanged; remains unchanged单项选择题

类似问题

High-powered money (monetary base) consists of:

The monetary base equals:

If a Central Bank prints its currency and exchanges it for foreign currency, its domestic monetary base and its International Reserves _.

3. The speaker seems most disappointed about:

2. A typical flying car costs about Answer Question 2[input] times more than a regular car.

Listen to this mini-lecture about flying cars, and answer the following questions. Questions 1 and 2. Complete the following sentences with a NUMBER only. Do NOT write words.1. Car batteries would need to provide Answer Question 1[input] times more energy for a flying car.

Choose A, B, C or D as the best answer.30. The author’s main argument is that __________.

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单