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

Question

Quizplus · Accepted Answer

Lowering the discount rate encourages banks to borrow more money from the Fed, increasing the amount of money in circulation and therefore increasing the money supply. Raising the minimum reserve ratio would have the opposite effect, as banks would be required to hold onto more of their deposits and have less funds to lend out. Selling securities on the open market would also reduce the money supply as it would decrease the amount of money available for banks to lend out.

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