Which of the following lists two things that both decrease the money supply?
A) Make open market purchases and raise the reserve requirement ratio.
B) Make open market purchases and lower the reserve requirement ratio.
C) Make open market sales and raise the reserve requirement ratio.
D) Make open market sales and lower the reserve requirement ratio.

Question

Quizplus · Accepted Answer

Both making open market sales and raising the reserve requirement ratio decrease the money supply. When the Federal Reserve sells government securities in open market operations, it takes money out of circulation and reduces the money supply. Similarly, when banks are required to hold a higher percentage of their deposits in reserves, they have less money available for lending and thus reduce the money supply. Therefore, option C is the correct choice.

Which of the Following Lists Two Things That Both Decrease