If a central bank wanted to increase the money supply, which of the following would it most likely do?

Question

Quizplus · Accepted Answer

To increase the money supply, a central bank would want to inject more money into the economy. One way it can do this is by making open market purchases, which means buying government securities from banks and other financial institutions. This injects new money into the system and makes it easier for banks to lend to businesses and consumers, hence increasing the money supply. Lowering the bank rate also helps by reducing the cost of borrowing, making it more attractive for businesses and consumers to take out loans and spurring economic activity. Therefore, option A is the correct answer.

If a Central Bank Wanted to Increase the Money Supply