Question

What action would the Federal Reserve take in order to provide banks more money for lending?
A. increase the discount rate for all banks
B. Purchase government bonds from banks
C. Sell government bonds to banks
D. Increase the reserve ratio from 3% to 5%

Answer 1

Answer:

A - INCREASE THE DISCOUNT RATE FOR ALL BANKS

Answer 2

Explanation:

Conversely, if the Fed sells bonds, it decreases the money supply by removing cash from the economy in exchange for bonds. ... OMO also affects interest rates because if the Fed buys bonds, prices are pushed higher and interest rates decrease; if the Fed sells bonds, it pushes prices down and rates increase.