Question

If the fed wants to increase the money supply it should: select one:

a. raise the reserve requirement.
b. raise the discount rate.
c. cut taxes.
d. buy government securities.

Answer 1

I think the answer is choice B. The discount rate is the interest rate charged on loans given to banks by the Fed. When the discount rate is increased, banks increase interest rates on loans, people take out less loans, people have more money to spend, which improves the money supply as well as the economy.