4. Problems and Applications Q2

A. When the Fed sells bonds in open-market operations, it (decreases, increases) the money supply.

B. If the Fed raises the reserve requirement, the money supply (decreases, increases).

C. If the Fed wants to increase the money supply, it can(decreases, increases) the interest rate it pays on reserves.

D. When the FOMC decreases its target for the federal funds rate, the money supply will (decreases, increases)

E. If bankers decide to hold more excess reserves because they are fearful of bank runs, the money supply (decreases, increases).