Which of the following represents an action by the Federal Reserve that is designed to decrease the money supply?

Question

Quizplus · Accepted Answer

An increase in the required reserve ratio means that banks are required to hold a higher percentage of their deposits as reserves, reducing their available funds for lending and ultimately decreasing the money supply. Choices A, C, and D would all increase the money supply: buying government securities in the open market injects new funds into the economy, an increase in federal spending would increase government outlays and ultimately increase the money supply, and a decrease in the discount rate would encourage banks to borrow more from the Fed and increase their available funds for lending.

Which of the Following Represents an Action by the Federal