Which of the following can the Fed do to change the money supply?
A)change reserves or change the reserve ratio
B)change reserves but not change the reserve ratio
C)change the reserve ratio but not change the reserve ratio
D)neither change reserves nor change the reserve ratio

Question

Quizplus · Accepted Answer

The Fed can change the money supply by either changing reserves or changing the reserve ratio. By increasing or decreasing reserves through open market operations, the Fed can influence the amount of money banks are able to lend out, thus affecting the money supply. Additionally, by changing the reserve ratio (the amount of reserves banks are required to hold relative to their deposits), the Fed can alter banks' ability to create new loans and affect the money supply.

Which of the Following Can the Fed Do to Change