Suppose you read in the paper that the Federal Reserve plans to expand the money supply.The Fed is most likely to do this by

Question

Quizplus · Accepted Answer

The Federal Reserve typically expands the money supply by purchasing government bonds from the public, which increases the amount of money in circulation. This is known as open market operations and is a common tool used by central banks to influence monetary policy. Printing more currency (choice A) would increase the money supply, but it can also lead to inflation if done excessively. Selling government bonds to the public (choice C) would decrease the money supply, which is the opposite of the Fed's goal in this scenario. Finally, buying newly issued government bonds directly from the government itself (choice D) is not a common practice and would not necessarily expand the money supply.

Suppose You Read in the Paper That the Federal Reserve