To decrease the money supply,the Federal Reserve could

Question

Quizplus · Accepted Answer

Increasing the discount rate would make it more expensive for banks to borrow money from the Federal Reserve, leading them to be more cautious in their lending practices and ultimately reducing the amount of money that is out in circulation. Decreasing the required reserve ratio would have the opposite effect by allowing banks to keep less money in reserves and increasing their ability to lend. Forbidding the reselling of U.S. Treasury securities and encouraging banks to lend money to borrowers would not have a direct impact on the money supply. Conducting an open market purchase of U.S. Treasury securities would increase the money supply, so it is not an effective option for decreasing it.

To Decrease the Money Supply,the Federal Reserve Could