Which of the Following Increases the Quantity of Money

question 91

Multiple Choice

Which of the following increases the quantity of money?

• A) an increase in the government's budget deficit
• B) the Fed's purchase of a government security
• C) an individual's cash withdrawal from a bank
• D) an individual's purchase of a government security from the Fed

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Definitions:

Monetary Policy Weapon

Tools used by central banks to control the supply of money in the economy, influencing interest rates and inflation.

Legal Reserve Requirement

The minimum amount of reserves that banks are required to hold against deposits, as mandated by central banks.

Excess Reserves

Funds that banks hold over and above the required minimum by the central bank to cover depositor withdrawals.

Open Market Operations

Actions undertaken by a central bank, such as buying or selling government securities, to control the money supply and interest rates.