A) increase the reserve ratio.
B) increase the discount rate.
C) buy government securities in the open market or initiate bond repos.
D) sell government securities in the open market or initiate bond reverse repos.

Question

A) increase the reserve ratio. 
B) increase the discount rate. 
C) buy government securities in the open market or initiate bond repos. 
D) sell government securities in the open market or initiate bond reverse repos.

Quizplus · Accepted Answer

Buying government securities in the open market or initiating bond repos increases the money supply in the economy since it involves injecting funds into the banking system. This helps to stimulate economic growth and investment. Increasing the reserve ratio or discount rate reduces the money supply and can potentially slow down economic growth. Selling government securities in the open market or initiating bond reverse repos can also potentially reduce the money supply and slow down economic growth. Therefore, the best choice in this scenario is to buy government securities in the open market or initiate bond repos.

A) Increase the Reserve Ratio