If the Fed wishes to decrease the money supply, it could:

Question

Quizplus · Accepted Answer

Increasing the reserve requirement forces banks to hold a higher percentage of their deposits in reserve and thereby decreases the amount of money that can be loaned out, ultimately decreasing the money supply. Buying bonds (A) would increase the money supply, decreasing the discount rate (C) would encourage banks to borrow more money, ultimately increasing the money supply, and printing less currency (D) would have a negligible effect on the overall money supply.

If the Fed Wishes to Decrease the Money Supply, It