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3. What are the effects of the following events on the monetary base? i. The Treasury writes checks to Social Security recipients for $800 million. Monetary base would increase ii. The Federal Reserve buys a new fleet of cars for $5 million. No impact because it is a consumption of goods iii. The Federal Reserve sells $5 billion of Treasury bills in the open market. Money supply would decrease by $5 billion iv. The Federal Reserve sells $700 million of its German bonds for euros.

3. What are the effects of the following events on the monetary base? i. The Treasury writes checks to Social Security recipients for $800 million. Monetary base would increase ii. The Federal Reserve buys a new fleet of cars for $5 million. No impact because it is a consumption of goods iii. The Federal Reserve sells $5 billion of Treasury bills in the open market. Money supply would decrease by $5 billion iv. The Federal Reserve sells $700 million of its German bonds for euros.

Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter21: The Monetary System
Section: Chapter Questions
Problem 10PA
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3. What are the effects of the following events on the monetary base? i. The Treasury writes checks to Social Security recipients for $800 million. Monetary base would increase ii. The Federal Reserve buys a new fleet of cars for $5 million. No impact because it is a consumption of goods iii. The Federal Reserve sells $5 billion of Treasury bills in the open market. Money supply would decrease by $5 billion iv. The Federal Reserve sells $700 million of its German bonds for euros.
Transcribed Image Text:3. What are the effects of the following events on the monetary base? i. The Treasury writes checks to Social Security recipients for $800 million. Monetary base would increase ii. The Federal Reserve buys a new fleet of cars for $5 million. No impact because it is a consumption of goods iii. The Federal Reserve sells $5 billion of Treasury bills in the open market. Money supply would decrease by $5 billion iv. The Federal Reserve sells $700 million of its German bonds for euros.
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