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Which of the following actions would cause an increase to the money supply? A. The New...

Which of the following actions would cause an increase to the money supply?
  • A. The New York Fed trading desk sells Treasury securities in the secondary market.
  • B. The Federal Reserve Board of Governors raises the discount rate.
  • C. The New York Fed trading desk purchases Treasury securities in the secondary market.
  • D. The Federal Reserve Board of Governors raises the reserve requirements.
  • E. both (C) and (D).
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Answer #1

The answer to the question is c ) the NY fed trading desks purchase treasury in the secondary market

Because when fed will purchase securities, it will give out money in the secondary market and banks will have more to lend and will lower interest rate and thus money supply will increase

A is incorrect because its the opposite of c.

B ) if fed raises the discount rate, it will decrease the amount of money supply

D is incorrect because if reserve requirment will increase, banks will have less to loan out in the market therefore money supply will decrease

I hope this helps

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