Which of the following would cause the money supply in the United States to expand?
A) A decrease in reserve requirements.
B) An increase in the discount rate.
C) The sale of bonds by a Federal Reserve bank.
D) An increase in the world supply of gold.

Question

Quizplus · Accepted Answer

A decrease in reserve requirements means that banks are required to hold less money in reserves and can lend out more money. This increases the amount of money in circulation and expands the money supply in the United States. The other choices would not lead to an expansion of the money supply. An increase in the discount rate would discourage borrowing and reduce the money supply. The sale of bonds by a Federal Reserve bank would decrease the money supply by taking money out of circulation. An increase in the world supply of gold may affect the value of the dollar, but would not necessarily impact the money supply.

Which of the Following Would Cause the Money Supply in the United