There are several ways that governments can increase or decrease the money supply. Match the descriptions below with the corresponding policy tool. It\'s possible that a description does not apply to any of the terms. Solution Open market operations is the technique by which the Government sells and purchases Government securities in open market. This is a monetary policy tool. Answer \" A central bank purchasing existing bonds.\" Reserve requirement : An increase in the percentage of deposits that banks must keep on hand. Discount rate : This is the rate at which Central banks lends loans to commercial banks. An increase in the interest rate that a central bankk charges commercial banks for loans. The rest do not apply to any category..

1. There are several ways that governments can increase or decrease the money supply. Match the
descriptions below with the corresponding policy tool. It's possible that a description does not
apply to any of the terms.
Solution
Open market operations is the technique by which the Government sells and purchases
Government securities in open market. This is a monetary policy tool. Answer " A central bank
purchasing existing bonds."
Reserve requirement : An increase in the percentage of deposits that banks must keep on hand.
Discount rate : This is the rate at which Central banks lends loans to commercial banks. An
increase in the interest rate that a central bankk charges commercial banks for loans.
The rest do not apply to any category.