To increase the money supply, the Fed might:

Name: To increase the money supply, the Fed might:
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Question

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The most common way for the Fed to increase the money supply is by buying bonds in the open market. When the Fed buys bonds from banks, it pays for them by adding reserves to the banks' accounts. This increases the banks' ability to make loans, which expands the money supply. The other options listed would actually decrease the money supply or have no effect on it.

To Increase the Money Supply, the Fed Might