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

Question

Quizplus · Accepted Answer

Making open-market sales reduces the amount of money in circulation by taking money out of the economy. Raising the reserve requirement ratio means that banks must hold a larger percentage of their deposits in reserve, leaving them with less money to lend out, which also reduces the money supply. Therefore, only option C contains two actions that decrease the money supply.

Which of the Following Lists Contains Only Actions That Decrease