To increase the money supply, the Fed might _____

Question

Quizplus · Accepted Answer

To increase the money supply, the Fed would need to decrease the discount rate. This would encourage banks to borrow more from the Fed, which would increase their reserves and allow them to loan out more money, thus increasing the overall money supply. Increasing the reserve requirement would have the opposite effect by reducing the amount of money banks can loan out. Selling government securities and increasing the discount rate would also decrease the money supply. Selling bonds on the open market and increasing the reserve requirement would also decrease the money supply.

To Increase the Money Supply, the Fed Might _____