A combination of the Fed's purchases of government securities and a decrease in reserve requirements would:

Question

Quizplus · Accepted Answer

The Fed's purchases of government securities inject money into the banking system and decrease the yield on those securities, which encourages banks to make more loans. With a decrease in reserve requirements, banks are required to hold less money in reserve and can lend out more, which further increases the money supply. Therefore, a combination of these two actions would increase the money supply.

A Combination of the Fed's Purchases of Government Securities and a Decrease