To expand the money supply, the Federal Reserve would have to:

Question

Quizplus · Accepted Answer

To expand the money supply, the Federal Reserve would have to make an open purchase of Treasury bills. This is because when the Fed buys Treasury bills from banks, it increases the banks' reserves, allowing them to lend more money, which in turn increases the overall money supply. An open sale of Treasury bills would have the opposite effect, reducing the money supply. Raising interest rates would also have the opposite effect, as it would discourage borrowing and reduce the money supply. Finally, the Federal Reserve does have some independence from Congress and does not need approval for all of its actions.

To Expand the Money Supply, the Federal Reserve Would Have