Answer:
Find the answer in the explanation section.
Explanation:
To increase money supply, the Federal Reserve can use the following tools:
1. Open-market operation: This is a situation in which the Fed is involved in buying and selling of securities e.g government bonds. To increase money supply, the Fed buys securities from commercial banks, this increases the quantity of money in circulation.
2. Reserve requirements: This is a regulatory requirements in which banks are required to keep portion of their Capital with the Fed. To increase money supply, the Fed needs to reduce the portion of their capital to be kept with them. This makes commercial banks have money money to lend.
3. Discount rate. The Fed also needs to reduce the interest rate it is charging commercial banks for borrowing.
Answer:reducing the reserve requirement on banks
Explanation:
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