Which of the following will cause the U.S. money supply to expand?

Question

Quizplus · Accepted Answer

When a commercial bank uses excess reserves to extend a loan to a customer, it creates new money and expands the money supply.

Answer: B
 When a commercial bank purchases U.S. securities from the Fed, it increases the reserves held by the bank, which can then be used to make additional loans, thereby expanding the money supply.

Answer: C and D
 An increase in reserve requirements (choice C) or an increase in the discount rate (choice D) would decrease the amount of money that banks can lend out and therefore contract the money supply.

Which of the Following Will Cause the U