If the currency drain increases, how can the Fed adjust the ...

[nelaaney]

If the currency drain increases, how can the Fed adjust the monetary base to offset the effect on the quantity of money?
 
  What will be an ideal response?

Question 2

Excess capacity is the
 
  A) difference between a perfectly competitive firm's and a monopolistically competitive firm's output.
  B) difference between a perfectly competitive firm's and a monopoly's output.
  C) output at the maximum point of the ATC curve.
  D) None of the above answers is correct.

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Answer to Question 1

If the currency drain 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.

Answer to Question 2

D

[nelaaney]

Thank you

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Happy to help you