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

Question

Quizplus · Accepted Answer

A decrease in reserve requirements means banks are required to hold less money in reserves, which frees up more money to be lent out and increases the money supply.

None of the other choices would result in an increase in the money supply: 
A) An increase in reserve requirements would require banks to hold more money in reserve, which would decrease the amount of money available to be lent out and decrease the money supply. 
B) An increase in the discount rate would make it more expensive for banks to borrow money from the central bank, which would decrease the amount of money available to be lent out and decrease the money supply. 
D) An increase in taxes would decrease the amount of money people have available to spend and invest, which would decrease the money supply.

Which of the Following Will Result in an Increase in the Money