If the Federal Reserve wanted to change the money supply in the economy, it would be least likely to
A) buy bonds on the open market.
B) sell bonds on the open market.
C) change the level of reserves required to be held by banks.
D) change the federal funds rate.

Question

Quizplus · Accepted Answer

Changing the level of reserves required to be held by banks directly affects the amount of money banks are able to lend and therefore impacts the money supply in the economy. Therefore, it is not the least likely option for the Federal Reserve to use if they wanted to change the money supply. A, B, and D all directly impact the money supply by affecting the availability and cost of funds in the economy.

If the Federal Reserve Wanted to Change the Money Supply