Which of the following is an appropriate monetary policy if the Fed wants to increase the money supply?
A) An increase in the required reserve ratio.
B) An increase in the discount rate.
C) Purchases of bonds in open market operations.
D) Higher taxes on interest income.

Question

Quizplus · Accepted Answer

When the Fed buys bonds in open market operations, it increases the money supply by injecting cash into the banking system, which in turn leads to an increase in spending and lending. This is known as expansionary monetary policy. A, B, and D are not appropriate actions to take if the goal is to increase the money supply.

Which of the Following Is an Appropriate Monetary Policy If