When a Reserve Currency Country Runs a Balance of Payments

Multiple Choice

When a reserve currency country runs a balance of payments deficit and a nonreserve currency country buys the reserve currency to finance the reserve country's deficits,the monetary base in the nonreserve country ________ and the monetary base in the reserve country ________.

A) increases; decreases
B) increases; does not change
C) decreases; does not change
D) decreases; increases