If the Fed Sterilizes the Purchase of Foreign Assets

question 25

Multiple Choice

If the Fed sterilizes the purchase of foreign assets,

• A)the monetary base is left unchanged.
• B)the monetary base rises by the amount of the purchase.
• C)the monetary base falls by the amount of the purchase.
• D)the monetary base may rise, fall, or remain unchanged depending on the reaction of domestic interest rates to the purchase.

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Definitions:

Assumptions

Premises or beliefs taken as true without verification, often serving as starting points for reasoning and decision-making.

Realities

The actual condition of affairs, contrasting with a theoretical or imagined scenario.

Excited

The state of being energized or enthusiastic about something, often with anticipation or eagerness.

Anxious

Experiencing worry, unease, or nervousness, typically about an imminent event or something with an uncertain outcome.