If the Fed wishes to increase the money supply then it should:

Question

Quizplus · Accepted Answer

Buying government securities on the open market is a common method used by the Fed to increase the money supply. As the Fed buys these securities from banks and other financial institutions, those institutions receive an influx of cash which they can then lend out to consumers and businesses, leading to an increase in the overall money supply. Increasing the required reserve ratio would, in fact, decrease the money supply as banks would be required to hold more of their deposits in reserve. Increasing the discount rate would also decrease the money supply as it would raise the cost of borrowing from the Fed, leading banks to lend out less money.

If the Fed Wishes to Increase the Money Supply Then