To increase the money supply

Question

Quizplus · Accepted Answer

To increase the money supply, the Federal Reserve should buy government securities from banks. This will increase the cash reserves of the banks, and in turn, they will have more money to lend, thus increasing the overall money supply. Selling government securities would decrease the cash reserves of banks, reducing the loan amount, and leading to a decrease in the money supply. Similarly, if commercial banks reduce their loans, it will lead to a decrease in the money supply. Reducing the loan amount of banks by the Federal Reserve would also decrease the money supply.

To Increase the Money Supply