Question

In an inflation the money supply can be _____________ by the Fed selling securities.

Answer 1

Reduce

Step-by-step explanation:

Open market operations is one of the monetary policy instrument used by the Fed for controlling the money supply in an economy. There is a buying and selling of government securities in the open market. In our case, there is a situation of inflation.

In this situation, Fed sells the government securities to the public. Therefore, there is a flow of money from public to Fed. Hence, there is a fall in the money supply in an economy.