A decrease in the money supply might indicate that the Fed had
A)purchased bonds to increase banks reserves.
B)purchased bonds to decrease banks reserves.
C)sold bonds to increase banks reserves.
D)sold bonds to decrease banks reserves.

Question

Quizplus · Accepted Answer

Selling bonds decreases the money supply because it reduces the amount of reserves banks have to lend out, leading to a decrease in the amount of money in circulation.

A Decrease in the Money Supply Might Indicate That the Fed