Question

Which of the following actions is most likely to result in a decrease in the

money supply?
O
A. The Federal Reserve Bank buys Treasury bonds.
O
B. The required reserve ratio for banks is decreased.
O
C. The discount rate on overnight loans is lowered,
O
D. The government sells a new batch of Treasury bonds

Answer 1

C. The discount rate on overnight loans is lowered

Step-by-step explanation:

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Answer 2

D. The government sells a new batch of Treasury bonds

Explanation: Through open market operations (OMO), the Federal Reserve is able to buy or sell treasury bonds. By selling treasury bonds, the money supply is decreased which also affects interest rates. As you would expect, if the Federal Reserve was to buy more treasury bonds, then the money supply would be increased.