The Federal Reserve System changes the money supply by

Question

Multiple Choice
controlling the production of coins at the U.S. Mint.
changing the number of banks in the system.
providing forward guidance about how it intends to conduct monetary policy.
restricting the issuance of Federal Reserve Notes because paper money is the largest portion of the money supply.

Answer 1

The correct answer is: providing forward guidance about how it intends to conduct monetary policy.

While the Federal Reserve also manages money supply through other mechanisms like open market operations, forward guidance is a crucial tool for influencing expectations and economic activity. The other options provided do not accurately describe the primary methods the Federal Reserve uses to influence the money supply.