If the Federal Reserve wants to decrease the total spending in the economy, it can either _____ Treasury securities or _____ the reserve requirement.

Question

Quizplus · Accepted Answer

To decrease total spending in the economy, the Federal Reserve can sell Treasury securities, which removes money from circulation, and increase the reserve requirement, which reduces the amount of money banks can lend. Both actions effectively reduce the money supply, leading to decreased spending.

If the Federal Reserve Wants to Decrease the Total Spending