To increase the money supply,the Fed could

Question

Quizplus · Accepted Answer

To increase the money supply, the Fed can decrease the discount rate. Lowering the discount rate makes borrowing cheaper, which encourages banks to borrow more from the Fed and increase the amount of money in circulation. Selling government bonds (choice A) would decrease the money supply, as it takes money out of circulation. Increasing the reserve requirement (choice C) would also decrease the money supply, as it requires banks to hold more money in reserves and therefore lend out less money. Therefore, the correct answer is B.

To Increase the Money Supply,the Fed Could