Question

After a FOMC meeting, the Federal Reserve Bank concludes that they need to increase the monetary base by $120 million. In this case, the Fed can accomplish this goal by purchasing less than $120 million in securities purchasing exactly $120 million worth of securities selling exactly $120 million worth of securities selling less than $120 million worth of securities

Answer 1

Answer

Option 2

the monetary base increases by the increase in reserves or currency and that increase by the same amount by which government increases the money supply.

The purchase increases the money supply as the Fed purchases securities in the open market and send money in the economy and takes the securities.