Why is it more correct to say that the Fed (the central bank) controls the monetary base than to say it controls the amount of reserves?
What will be an ideal response?
The Fed, or any central bank, can create and destroy the monetary base by changing the size of its balance sheet. What it can't control is the currency holdings of the public. If people decide to hold more currency than the banking system will be depleted of reserves, but the monetary base does not change since it is the sum of reserves and public currency holdings.
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In general, entrepreneurs prefer:
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a. True b. False Indicate whether the statement is true or false