You serve as a staff economist for the Board of Governors of the Federal Reserve System. It is decided that an increase in the money supply is the correct policy, given the current economic situation. Which list of monetary policy actions would be appropriate?
Open-market purchase, higher discount rate, higher required reserve ratio
Open-market purchase, lower discount rate, lower required reserve ratio
Open-market sale, lower discount rate, lower required reserve ratio
Open-market sale, higher discount rate, lower required reserve ratio
The answer is B. The three strategies that will increase the money supply are:
Open market purchase: The Fed puts ...
This solution explains which three policies the Federal Reserve should use to increase the money supply.