Question

The Federal Reserve's tool for changing the money supply is the__________ (open market operation or reserve requirement or discont rate) In order to decrease the number of dollars in the U.S. economy the money supply, the Federal Reserve will_________( buy or sell) government bonds.

Answer 1

Open market operations; sell

Step-by-step explanation:

Open market operations; sell

Central bank (Federal bank) use the open market operation that encompasses the increase and decrease of reserve requirement, discount rate, etc. It also includes the selling of government bonds when Fed wants to decrease the money supply in the economy and it buys back when it wants to increase the money supply in the economy.