Which one of the following policies might the Fed initiate if it wanted to increase the money supply?
A)Sell government securities
B)Increase the reserve requirement
C)Increase the discount rate
D)Decrease the reserve requirement

Question

Quizplus · Accepted Answer

Decreasing the reserve requirement increases the amount of money that banks can lend out, thus increasing the money supply. Selling government securities decreases the money supply, increasing the reserve requirement decreases the amount of money banks can lend out, and increasing the discount rate makes borrowing from the Fed more expensive, all of which would decrease the money supply.

Which One of the Following Policies Might the Fed Initiate