If the Fed wants to increase the quantity of money, it can

Question

Quizplus · Accepted Answer

The Fed can increase the quantity of money by purchasing U.S. government securities on the open market, which increases the money supply in circulation. The other choices do not directly impact the money supply. Increasing the government budget deficit may lead to an increase in government borrowing, but it does not directly increase the money supply. Lowering income tax rates may increase disposable income, but it does not necessarily increase the money supply. Raising the exchange rate would actually decrease the money supply by making imported goods cheaper and increasing demand for foreign currency.

If the Fed Wants to Increase the Quantity of Money