If the Fed increases its discount loans to banks, makes an open market purchase of Treasury securities, or increases its foreign exchange reserves, the impact on its balance sheet will be the same. In each case the Fed's assets and liabilities will both increase; the level of reserves increases and the monetary base expands. All three of these actions have the same effect because they all result in an increase in the reserves available to the banking system, which therefore means an increase in the base.
Which one is correct?
a. True
b. False
Answer: a. True
Economics
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