Which one of the following policies might the Fed initiate if it wanted to increase the money supply?
A)sell government securities
B)increase the reserve requirement
C)increase the discount rate
D)decrease the reserve requirement

Question

Which one of the following policies might the Fed initiate if it wanted to increase the money supply?
A)sell government securities 
B)increase the reserve requirement 
C)increase the discount rate 
D)decrease the reserve requirement

Quizplus · Accepted Answer

Decreasing the reserve requirement would allow banks to lend out more money, increasing the overall money supply. Selling government securities, increasing the reserve requirement, and increasing the discount rate would all have the opposite effect of decreasing the money supply.

Which One of the Following Policies Might the Fed Initiate