Question

Which of the following events would be likely to increaseincrease the supply of​ money?

Answer 1

Answer:

D. The Fed decreases the discount rate relative to the federal funds rate.

Explanation:

The discount rate is the interest rate charged by the Central bank when commercial banks borrows funds from it.

When the discount rate is lowered, excess reserves increase and money supply increases.

The reserve requirement is the amount of deposits of commercial banks that should be kept as reserves. The higher the reserve requirement, the lower the money supply.

If banks hold more excess reserves, money supply falls.

An open market sale decreases money supply while an open market purchase increase money supply.

I hope my answer helps you.