he U.S. Federal Reserve discussed"a newlarge-scale asset purchaseprogram" commonly called"QE3." Some members said such a program could help the economy by loweringlong-term interest rates and making financial conditions more broadly easier. They discussed whether a new program should snap up more Treasury bonds or buyingmortgage-backed securities issued by the likes of Fannie Mae and Freddie Mac.

Source: The Wall Street Journal, August22, 2012

What would the U.S. Federal Reserve do to implementQE3, how would the monetary basechange, and how would bank reserveschange?

To implementQE3, the U.S. Federal Reserve would_______. As aresult, the monetary base and bank reserves_______ .

A.

print Federal Reservenotes; increase

B.

purchase Treasury bonds ormortgage-backed securities; increase

C.

lowerlong-term interestrates; increase

D.

purchase Treasury bonds ormortgage-backed securities; decrease