Suppose that the Federal Reserve wants to decrease the money supply. Which of the following policies...
Suppose that the Federal Reserve wants to decrease the money supply. Which of the following policies would achieve this goal?
Group of answer choices
Decrease the reserve requirement.
Buy Treasury Bills from banks.
Raise the Discount Rate.
Decrease the interest rate paid on reserves held at the Fed.
Homework Answers
Answer
option 3
Raise the Discount Rate
the decrease in reserve requirement increases the money supply
Buy of the treasury bills sends money in the economy and takes out the bills so the money supply increases
the decrease in interest rate encourages banks to give more loans which increase the money supply
the increase in discount rate discourages the banks to lend so decreases the money supply
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