What are the three ways the Federal reserve can change the money supply?
The Federal Reserve can change the money supply with 1) open market operations, 2)making changes in the reserve ratio, and 3) making changes in the discount rate. Of the three policies the open market is the most common.
When the federal reserve decreases the money supply it generally does by selling bonds true or false?
They buy bonds from investors, thereby putting more money into the supply. They sell bonds to investors, thereby drawing money out of the supply They can adjust the reserve requirements to change the money multiplier. This is a slowish process. They adjust the overnight loan rate to make it cheaper or costlier to violate reserve requirements.
The Government has no control over the money supply, only the loanable funds market. The only way the government can effect the economy is to change its spending, or change taxes. The Federal Reserve (not apart of the government) controls the money supply. It can buy/sell treasuries, raise/lower discount rate, as well as the reserve requirement in banks.