If the Fed simultaneously lowers the reserve requirement and sells government bonds, the money supply will:

Question

Quizplus · Accepted Answer

Lowering the reserve requirement typically expands the money supply by allowing banks to lend more. Selling government bonds typically contracts the money supply by removing liquidity from the economy. These actions have opposing effects, making the net impact on the money supply indeterminate without more information.

If the Fed Simultaneously Lowers the Reserve Requirement and Sells