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Category - Economics

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To increase the money supply in the United States, the Federal Reserve:
  1. buys government bonds from the public
  2. sells government bonds to the public
  3. buys government bonds from private enterprises
  4. sells government bonds to private enterprises
Explanation
Answer: A - To increase the money supply in the United States, the Federal Reserve buys government bonds from the public.

Key Takeaway: The main way in which the Federal Reserve controls the money supply in the United States is through government bonds using newly printed money. To increase the money supply, the Reserve buys government bonds from the public. Conversely, to decrease the money supply, it sells those bonds to the public.
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