When the Federal Reserve conducts open-market operations to increase the money supply, it buys government bonds from the public. Odecreases its lending to member banks. Oraises the discount rate. Oredeems Federal Reserve notes.
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This action injects money into the economy, increasing the money supply. Show more…
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When the Federal Reserve sells a government bond to a primary dealer, reserves in the banking system decrease and the monetary base decreases, everything else held constant.
Chandra J.
If the Fed wants to increase the money supply, it can BUY OR SELL bonds in open-market operations. If the Fed reduces the reserve requirement, the money supply INCREASES OR DECREASES. If the Fed wants to increase the money supply, it can INCREASE OR DECREASE the interest rate it pays on reserves. When the FOMC decreases its target for the federal funds rate, the money supply will INCREASE OR DECREASE. If bankers decide to hold more excess reserves because they are fearful of bank runs, the money supply DECREASES OR INCREASES.
Andrew D.
If the Fed buys U.S. Treasury securities, then this a. decreases reserves, causes banks to reduce their loans, and increases the money supply. b. increases reserves, causes banks to reduce their loans, and increases the money supply. c. increases reserves, encourages banks to make more loans, and increases the money supply. d. decreases reserves, causes banks to reduce their loans, and decreases the money supply.
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