Which of the following represents an action by the Federal Reserve that is designed to increase the money supply?

Question

Quizplus · Accepted Answer

When the Federal Reserve buys government bonds in the open market, it injects new money directly into the banking system, thereby increasing the money supply. An increase in the discount rate or the required reserve ratio, as in choices B and C, respectively, would result in a decrease in the money supply. A decrease in federal spending, as in choice D, would not necessarily have a direct impact on the money supply.

Which of the Following Represents an Action by the Federal