Question

To _____ the money supply, the Federal Reserve could _____.

	A.	decrease; lower the discount rate
	B.	increase; raise the federal funds rate
	C.	increase; lower the reserve requirements
	D.	decrease; conduct open-market purchases

Answer 1

From the given options only option C satisfy the condition given above .

The Federal Reserve Bank which is the central bank of United States

For increasing the money supply federal Reserve could lower the Reserve Requirement it means the bank will hold the less reserves and lend the money to the commercial banks at a lower rate so that money supply can be increased .

option a totally talk opposite.

suppose if the discount rate is lowered then money supply will increase not decrease.

In option D if open market purchase happened then there will be expansionary monetary policy and it will cause increase in money supply not decrease in the money supply .

Only answer true is option C