sapling learning There are several ways that governments can increase or decreas

Question

sapling learning There are several ways that governments can increase or decrease the money supply. Match the descriptions below with the corresponding policy tool. It's possible that a description does not apply to any of the terms. Open Market operations Discount Rate Reserve Requirement A central bank An increase in the An increase in government spending percentage of deposits that purchasing existing bonds banks must keep on hand A government An increase in the interest printing more currency rate that a central bank charges commercial banks for loans

Explanation / Answer

1. An increase in the percentage of deposits that banks must keep on hand: Reserve requirement.

2. A central bank purchasing existing bonds: Open Market Operation.

3. An increase in government spending: Does not apply to any of the items. (government spending is an instrument of fiscal policy)

4. A government printing more currency:Does not apply to any of the items. (it is called deficit financing which is an instrument of fiscal policy)

5. An increase in interest rate that a centralbank charges commercial banks for loans: Discount Rate

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