Question

A central bank that desires to reduce the quantity of money in the economy can: a. raise the reserve requirement. b. buy bonds in open market operations. c. lower the discount rate. d. engage in quantitative easing.

Answer 1

Answer:

Answer is A. Raise the reserve requirement.

Explanation:

Central bank is an independent financial institution charged with different responsibilities conducting monetary policy to providing financial services , which are focused on maintaining country's economic stability and stabilize country's currency.

Some additional responsibilities are regulating commercial banks activities, production and distribution of money, and control money supply among others.

Answer 2

Answer:

a. raise the reserve requirement.

Explanation:

A central bank that desires to reduce the quantity of money in the economy can raise the reserve requirement. This because the reserve requirement is a percentage of the deposits that a bank receives and that must be maintained every night and if this requirement is raised banks have to held a higher amount of money which means that a lower quantity goes into the economy.