If the Fed wants to reduce the money supply,

Name: If the Fed wants to reduce the money supply,
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Question

Quizplus · Accepted Answer

When the Fed wants to reduce the money supply, it increases the discount rate. By increasing the discount rate, commercial banks have to pay more to borrow money from the Fed, which reduces the amount of money they have available to lend out to consumers and businesses. This, in turn, reduces the overall money supply in the economy. Therefore, the correct answer is option A.

If the Fed Wants to Reduce the Money Supply