When the Fed wishes to increase the money supply,it can do so by

Question

Quizplus · Accepted Answer

All of the given options can be used by the Fed to increase the money supply:
A) Purchasing government securities through open market operations injects money into the economy as banks receive payment for the securities and increase their reserves, allowing them to lend out more money.
B) Lowering the Discount Rate makes it less expensive for banks to borrow from the Fed, encouraging them to borrow more and lend more money to consumers and businesses, increasing the money supply.
C) Reducing the Reserve Requirement means that banks are required to hold less money in reserves, freeing up more money for lending, which also increases the money supply. 
Therefore, D is the correct answer. E is not a valid option as it is not something the Fed can directly control.

When the Fed Wishes to Increase the Money Supply,it Can