Which of the following will result in a decrease in the money supply?
A) a tax cut
B) a decrease in reserve requirements
C) a decrease in the discount rate
D) an increase in the discount rate

Question

Quizplus · Accepted Answer

An increase in the discount rate will make borrowing more expensive for banks, thereby reducing their willingness to borrow from the central bank. This reduction in borrowing will lead to a decrease in the reserves held by banks and ultimately result in a decrease in the money supply.

Which of the Following Will Result in a Decrease in the Money