Question

Increasing and decreasing the money supply through monetary policy is generally done by __________. the Federal Reserve Congress the President the Federal Trade Commission

Answer 1

The Federal Reserve The federal reserve buys and sells government securities from and to banks to change the money supply. When the Federal Reserve buys securities, they increase the money supply by putting liquid cash on the bank balance sheets which is then lent out. When they sell securities, they take liquid cash away from bank balance sheets and trade them illiquid securities.