If the currency drain ratio increases, how can the Fed adjust the monetary base to offset the effect on the quantity of money?
What will be an ideal response?
If the currency drain ratio increases, the size of the money multiplier decreases, which decreases the quantity of money. To maintain the quantity of money at its initial amount by changing the monetary base, the Fed must increase the monetary base.
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Answer the following statement true (T) or false (F)
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A. first B. second C. third D. fourth