When the Federal Reserve conducts open market operations, it… (select statement A, B, C or D)
A. buys or sells government bonds. The money supply increases when buys bonds and decreases when sells bonds.
B. manipulates the rate at which it loans to member banks. Higher rates increase the money supply and lower rates decrease the money supply.
C. increases or decreases the required reserve ratio. Increasing the ratio will fuel deposit expansion and an increase to money supply.
D. buys and sells foreign currency. The money supply increases when purchasing occurs and decreases when selling occurs.