To increase the money supply in the economy,the Fed would:

Question

Quizplus · Accepted Answer

To increase the money supply in the economy, the Fed would carry out open market purchases and/or lower the discount rate. Open market purchases refer to the process of buying government securities from the market, which increases the liquidity of the market, leading to an increase in the money supply. Lowering the discount rate will encourage banks to borrow more, thereby increasing the money supply in the economy. On the other hand, increasing the discount rate and carrying out open market sales and/or raising the reserve ratio will decrease the money supply in the economy.

To Increase the Money Supply in the Economy,the Fed Would