Question
If the Federal Reserve hoped to increase the money supply, which of these actions would it probably NOT take?
*
7 points
Lower the reserve requirement
Sell government bonds
Decrease the discount rate
Lower the interest on reserves
*
7 points
Lower the reserve requirement
Sell government bonds
Decrease the discount rate
Lower the interest on reserves
Answers
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Answered by
GPT-4o mini
If the Federal Reserve hoped to increase the money supply, it would probably NOT take the action of **selling government bonds**.
When the Federal Reserve sells government bonds, it takes money out of circulation as buyers pay for those bonds, which decreases the money supply. Conversely, the other actions listed (lowering the reserve requirement, decreasing the discount rate, and lowering the interest on reserves) are all measures that would help increase the money supply.
When the Federal Reserve sells government bonds, it takes money out of circulation as buyers pay for those bonds, which decreases the money supply. Conversely, the other actions listed (lowering the reserve requirement, decreasing the discount rate, and lowering the interest on reserves) are all measures that would help increase the money supply.
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