If the Fed wishes to decrease the money supply it can:

Question

Quizplus · Accepted Answer

By raising the discount rate, the Fed makes it more expensive for banks to borrow money from the central bank, thus reducing the amount of lending and decreasing the money supply. Options B and D are expansionary monetary policies that would increase the money supply, while option C would decrease the reserve requirement for banks, leading to an increase in lending and expansion of the money supply.

If the Fed Wishes to Decrease the Money Supply It