If the Fed wishes to increase the money supply,it could

Question

Quizplus · Accepted Answer

Lowering the discount rate would encourage banks to borrow more money from the Fed, increasing their reserves and allowing them to lend out more money. This in turn would increase the overall money supply in the economy. Option B (raising the minimum reserve ratio) would have the opposite effect, as banks would be required to hold a higher proportion of their deposits as reserves, which would decrease the amount they could lend out. Option C (selling securities on the open market) would also decrease the money supply, as it would reduce the amount of money in circulation. Option D (issuing more bonds) is not a tool of the Fed for increasing the money supply, as bonds are a way to borrow money from the public, not to increase the overall money supply.

If the Fed Wishes to Increase the Money Supply,it Could