ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The Federal Reserve wants to reduce the nation’s money supply. This could be accomplished by doing all of the following EXCEPT
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decreasing the discount rate.
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increasing the reserve requirement.
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selling securities on the open market.
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making banks hold a reserve for all types of deposits.
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Explanation:
Detailed explanation-1: -By contrast, if the Fed sells or lends treasury securities to banks, the payment it receives in exchange will reduce the money supply.
Detailed explanation-2: -The Fed has three major tools that it can use to affect the money supply. These tools are 1) changing reserve requirements; 2) changing the discount rate; and 3) open market operations. The book discusses these tools of monetary policy on pages 389-395.
There is 1 question to complete.