If the Fed wishes to decrease the money supply,it could:

Question

Quizplus · Accepted Answer

Increasing the reserve requirement makes it more costly for banks to lend out money, so they will have less money to lend and the money supply will decrease. Buying a bond would inject money into the economy and decrease interest rates, leading to an increase in the money supply. Decreasing the discount rate would encourage banks to borrow more money from the Fed, thus increasing the money supply. Therefore, only increasing the reserve requirement would decrease the money supply.

If the Fed Wishes to Decrease the Money Supply,it Could