The correct answer would be option A, Decreases the discount rate.
To increase the money supply, Federal Reserve should decrease the discount rate.
Explanation:
Money Supply is regulated by the central bank of the concerned country. The control by the central bank has a direct impact on the increase or decrease of the supply of money.
If Federal Reserve of United States wants to increase the money supply, it just decrease the discount rate offered to the public and businesses. In this way, people will take out their money from the banks, which increase the money supply in the economy.
Similarly if FED wants to decrease the money supply in the economy, it just increases the discount rate.
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Answer:
A. decrease the discount rate and B. make an open market purchase
Explanation:
