Which of the following actions by the central bank would NOT increase the money supply?
A) Lower the discount rate.
B) Buy bonds on the open market.
C) Lower the reserve requirement.
D) Raise the interest rate that banks receive on their deposits at the Federal Reserve.

Question

Quizplus · Accepted Answer

Raising the interest rate that banks receive on their deposits at the Federal Reserve would encourage banks to hold more reserves instead of lending them out, which would not increase the money supply. Lowering the discount rate, buying bonds on the open market, and lowering the reserve requirement all serve to increase the money supply by making more funds available for banks to lend.

Which of the Following Actions by the Central Bank Would