Which of the following actions taken by the central bank would NOT reduce the country's money supply?
A) Raise the reserve requirement.
B) Raise the discount rate.
C) Sell bonds on the open market.
D) Reduce the interest rate that the Federal Reserve pays banks on their deposits at the Fed.

Question

Quizplus · Accepted Answer

Raising the reserve requirement, raising the discount rate, and selling bonds on the open market are all actions that would reduce the money supply. Reducing the interest rate that the Federal Reserve pays banks on their deposits would likely encourage banks to lend more rather than hold funds at the Fed, potentially increasing the money supply.

Which of the Following Actions Taken by the Central Bank