To expand the money supply the Fed could lower the required reserve ratio,lower the discount rate,or purchase government securities.

Question

Quizplus · Accepted Answer

Lowering the required reserve ratio means that banks are required to hold less money in reserves, which frees up more money to be loaned out and increases the money supply. Lowering the discount rate makes it cheaper for banks to borrow money from the Fed, which encourages them to borrow more and in turn lend out more, also increasing the money supply. Finally, purchasing government securities injects more money into the economy and increases the money supply as well.

To Expand the Money Supply the Fed Could Lower the Required