Which action is most likely to result in an increase in the money supply?

Question 10 options:

The required reserve ratio for banks is increased.

The inflation rate is reported at an all-time low.

The discount rate on overnight loans is lowered.

The government sells a new batch of Treasury bonds.

Question

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Shayna Moreno

19 November, 11:11

Which action is most likely to result in an increase in the money supply?

Question 10 options:

The required reserve ratio for banks is increased.

The inflation rate is reported at an all-time low.

The discount rate on overnight loans is lowered.

The government sells a new batch of Treasury bonds.

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Answers (1)

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Kamora · Answer 1

The discount rate on overnight loans is lowered.

Explanation:

The action that is most likely results in an increase in the money supply is (C) which is the discount rate on overnight loans is lowered.

Discount rates are used to determine today's value of money paid or received. In other words the discount rate for financial institutions is the rate of return that they will experience when they re-paid the loans that they granted to other institutions. The discount rate allows the central bank of a country to control money supply in circulation this is done by either lowering the interest rate or increasing it.

Which action is most likely to result in an increase in the money supply?Question 10 options:The required reserve ratio for banks is increased.The inflation rate is reported at an all-time low.The discount rate on overnight loans is lowered.The government sells a new batch of Treasury bonds.