Which of the following policy actions by the Fed would cause the money supply to increase?
A) An open market sale of government securities.
B) An increase in required reserve ratios.
C) A decrease in the discount rate.
D) All of the above.

Question

Quizplus · Accepted Answer

A decrease in the discount rate would encourage banks to borrow more from the Fed, increasing the reserves in the banking system, which leads to an increase in the money supply. Open market sale of government securities and an increase in required reserve ratios would decrease the reserves in the banking system, leading to a decrease in the money supply.

Which of the Following Policy Actions by the Fed Would