The money supply contracts when the Fed
A)replaces old worn-out notes and bills.
B)borrows from the Treasury.
C)sells government securities.
D)purchases stocks from corporate businesses.

Question

Quizplus · Accepted Answer

When the Fed sells government securities, it decreases the amount of money available for lending and spending, thereby contracting the money supply. The other options would not necessarily contract the money supply.

The Money Supply Contracts When the Fed