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If the Federal Open Market Committee (FOMC) chooses to decrease the money supply, the Federal Reserve would _____.

lower reserve requirements


sell a certain number of government securities


lower the target rate for the federal funds rate


purchase a certain number of government securities

1 Answer

1 vote

Answer:

The correct answer would be option B, Sell a certain number of Government Securities.

Step-by-step explanation:

Increasing the money supply in an economy means that people have more money with them and they prefer to not put their money in banks or government financial institutions. When government wants to decrease the money supply, they simply introduce securities that will attract people and make them buy those securities and thus put their money in the banks and eventually decreasing the money supply from the economy.

These government securities can be Treasury bills, Treasury Notes, bonds, etc.

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