To decrease the money supply, the central bank could:

Question

Quizplus · Accepted Answer

Open-market sales refer to the central bank selling government securities to commercial banks and other financial institutions. This decreases the money supply as the banks have less money to lend out. Lowering the discount rate or federal funds rate would encourage banks to borrow more, increasing the money supply. Therefore, option B of making open-market sales is the best choice to decrease the money supply.

To Decrease the Money Supply, the Central Bank Could