Which of the following lists contains only actions that decrease the money supply?
A)raising the bank rate; making open-market purchases
B)raising the bank rate; making open-market sales
C)lowering the bank rate; making open-market purchases
D)lowering the bank rate; making open-market sales

Question

Quizplus · Accepted Answer

Raising the bank rate increases the cost of borrowing, which reduces spending and decreases the money supply. Making open-market sales decreases the reserves of banks, leading to a decrease in lending and money creation, which also decreases the money supply. Thus, only option B contains actions that decrease the money supply.

Which of the Following Lists Contains Only Actions That Decrease