Which of the following actions of the Fed is likely to lead to a decrease in the money supply?

Question

Quizplus · Accepted Answer

Increase in reserve requirements means that banks will have to hold a larger portion of their deposits as reserves, leaving less money available to lend out. This is likely to decrease the money supply. The other options are likely to increase the money supply - a lower discount rate encourages banks to borrow more money, a decrease in reserve requirements means banks can lend out more money, and purchasing government securities injects new money into the system.

Which of the Following Actions of the Fed Is Likely