To reduce the money supply in the economy, the Fed would
A) increase the discount rate and/or raise the reserve ratio.
B) carry out open market purchases and/or raise the reserve ratio.
C) carry out open market sales and/or lower the discount rate.
D) carry out open market purchases and/or lower the discount rate.

Question

Quizplus · Accepted Answer

Increasing the discount rate and raising the reserve ratio both reduce the money supply by making borrowing more expensive and requiring banks to hold more reserves, respectively.

To Reduce the Money Supply in the Economy, the Fed