If the Fed wanted to use all three of its primary tools to increase the money supply, it should
A) raise the reserve requirement, lower the discount rate, and conduct an open market sale.
B) raise the reserve requirement, raise the discount rate, and conduct an open market sale.
C) lower the reserve requirement, raise the discount rate, and conduct an open market purchase.
D) lower the reserve requirement, lower the discount rate, and conduct an open market purchase.

Question

Quizplus · Accepted Answer

To increase the money supply, the Fed needs to use expansionary policies. Lowering the reserve requirement will increase the amount of money banks can lend out. Lowering the discount rate will encourage banks to borrow more money from the Fed, which will increase the money supply. Conducting an open market purchase will inject money into the economy by purchasing government securities from banks, which increases the amount of money they have available to lend out. Therefore, lowering the reserve requirement, lowering the discount rate, and conducting an open market purchase is the best choice to increase the money supply.

If the Fed Wanted to Use All Three of Its