Which of the following changes to the money supply can the government take to stimulate a slowing of the economy?(1 point)

Question

Responses

It can decrease the money supply by increasing the discount rate.
It can decrease the money supply by increasing the discount rate.

It can increase the money supply by selling bonds in the open market.
It can increase the money supply by selling bonds in the open market.

It can decrease the money supply by buying bonds in the open market.
It can decrease the money supply by buying bonds in the open market.

It can increase the money supply by decreasing the reserve requirement.

Answer 1

To stimulate a slowing economy, the government would aim to increase the money supply. Therefore, the correct response is:

It can increase the money supply by decreasing the reserve requirement.

This action allows banks to lend more money, increasing the overall money supply in the economy.

The other options listed would either reduce the money supply or are incorrect in how they function in terms of monetary policy.