Which of the following actions of the Fed would increase the money supply?
A)the purchase of U.S.government securities.
B)a reduction in the discount rate.
C)a reduction in the required reserve ratio.
D)all of the above are correct.

Question

Quizplus · Accepted Answer

All of the above actions would increase the money supply. When the Fed purchases U.S. government securities, it injects new money into the economy, increasing the money supply. When the discount rate is reduced, it becomes cheaper for banks to borrow money from the Fed, increasing their ability to lend to customers and increasing the money supply. When the required reserve ratio is reduced, banks are required to hold less money in reserve and can lend out more, which increases the money supply.

Which of the Following Actions of the Fed Would Increase