Question

g To decrease the money supply, the Fed could Group of answer choices All of the above are correct. increase the discount rate. sell government bonds. increase the reserve requirement.

Answer 1

Answer:

All of the above are correct

Explanation:

When central banks or the Federal Reserve wants to control money supply in the economy it uses various tools that either mop up or increase money supply to the economy.

An increase in discount rate results in high interest rate of borrowing by commercial banks from the Federal Reserve. Cost of borrowing nos increased so money supply reduces.

Selling of government bonds is used to reduce cash in circulation. As investors buy the bonds money is moved from the economy to the Federal Reserve.

Reserve requirement is the amount of cash that commercial banks are required to keep with the Reserve. An increase in this means commercial banks have less to give to its customers