Question

Which of the following events will directly cause the U.S. money supply to rise by $400 million?

a. Bank customers deposit $400 million cash into checking accounts (DDO)
b. The Federal Reserve purchases $400 million of T bills from dealers
c. Bank borrowers repay $400 million in loans to banks
d. Commerce Bank sells $400 million of T bills to dealers.

Answer 1

b. The Federal Reserve purchases $400 million of T bills from dealers

Step-by-step explanation:

The money supply is the amount of money in circulation measured by narrow money (MO) and broad money (M4). This is related with the increase in the money supply in the economy.