Question

Which of these increase or decrease the money supply? A) Federal Reserve buys bonds in open-market operation. B) Federal Reserve reduces the reserve requirement. C) Federal Reserve increases the interest rate it pays on reserves. D) Citibank repays a loan it had previously taken from the Federal Reserve. E) After a rash of pickpocketing, people decide to hold less currency. F) Fearful of bank runs, bankers decide to hold more excess reserves. G) The FOMC increase its target for the federal funds rate.

Answer 1

A) It increases the money supply as it would have pay money in order to buy bonds.
B) When reserve requirements are reduced banks would have to keep lesser money at FED which increases the money supply.
C) This would reduce money supply as banks would keep more reserves at FED to earn more interest rate.
D) Decreases money supply as the loan is repaid.  
E) Increases money supply
F) Decreases money supply as banks hold more excess reserves.  
G) Decreases money supply as FOMC sells government securities