Which of the following Fed actions will decrease the money supply?
A) an open market purchase of Treasury bills
B) an increase in the required reserve ratio
C) a decrease in the discount rate relative to the federal funds rate
D) all of the above
E) none of the above

Question

Quizplus · Accepted Answer

An increase in the required reserve ratio forces banks to hold more reserves, which decreases their ability to create loans and effectively decreases the money supply. Open market purchases and a decrease in the discount rate would both increase the money supply.

Which of the Following Fed Actions Will Decrease the Money