Why Did the Monetary Base Increase Rapidly During the Economic

question 58

Multiple Choice

Why did the monetary base increase rapidly during the economic crisis of 2008?

• A) The Fed sold financial assets and extended fewer loans.
• B) The Fed increased both its purchase of assets and quantity of loans extended.
• C) The Fed increased its purchases of assets, but offset this with an increase in the reserve requirement.
• D) The Fed sold financial assets, but offset this with a reduction in the reserve requirement.

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Definitions:

Liability

A liability refers to financial obligations or debts that a company owes and is required to repay in the future.

Accounting Equation

The fundamental equation of accounting, Assets = Liabilities + Shareholder's Equity, representing the relationship between a company's resources and claims against those resources.

Supplies

Items that are consumed or used up in the daily operations of a business, like office supplies or manufacturing materials.

Account

A record in the financial statements that represents a specific asset, liability, equity, revenue, or expense, used to track the changes in those balances.