Homework Answers
Since monetary base= currency + reserve
Money supply=money multiplier* monetary base
Since the Reserve Bank of Australia(RBA) purchases government Bonds from Australian Bank. So this transaction increases the monetary base and increases the money supply.
This is because with the purchase of government bonds, Money will be given in the exchange, so money supply will increase in the form of currency. Hence monetary base will increase. This leads to an increase in the money supply also.
Hence option a is the correct answer.
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