Question

The Federal Reserve _____ the money supply to lower inflation. increases decreases

Answer 1

Answer:

B) Decreases

Explanation:

Inflation itself is caused by he economy growing and thus more money bieng made. As a result, the value of the money becomes less. To combat this, the Federal Reserve DECREASES the money supply. So, our answer is B).

Answer 2

The Federal Reserve decreases the money supply to lower inflation. increases decreases.

Explanation:

Central banks are implementing various different ways of raising or decreasing the bank system's capital. This is what monetary policy is called. Although in the hopes of generating money in the economy, the Board of the Federal Reserve, generally known as the fed, may print paper money at its own choice, this is not the mechanism employed, at least not in the United States.

The Fed will purchase government bonds if the supply of money is to be raised. It provides the debt dealers selling the bonds with cash and raises their overall sum of money.

Alternatively, the Fed buys debt from its portfolio if it wants to reduce the money supply, thus generating liquidity and withdrawing money from the economy. A major economic activity is to change the federal fund price.