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Suppose the U.S. Treasury pays contractors to conduct repairs on the interstate highway system, causing the Treasury's deposits at the Fed to fall. What effect

Suppose the U.S. Treasury pays contractors to conduct repairs on the interstate highway system, causing the Treasury's deposits at the Fed to fall.

  1. What effect will this have on reserves and the monetary base?
  2. What defensive action will the Fed take to counteract this result?

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