Which of the following combinations would unambiguously increase the supply of money?
a. The Fed pays a higher interest rate on bank reserves and increases the required reserve ratio.
b. The Fed conducts an open market purchase of government securities and raises the discount rate.
c. The Fed pays a higher interest rate on bank reserves and conducts an open market purchase of government securities.
d. All of the above would produce conflicting effects on the supply of money
Question 2
If the government fiscal deficit equals 240 million and government borrowing equals 120 million, what is the change in the money supply in the economy?
a. 120 million
b. 240 million
c. 360 million
d. 480 million
e. 600 million
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