Respuesta :
In order the increase the money supply, the Federal Reserve would have to increase the discount rate and decrease the reserve requirement. Since these actions are expansionary, it would help to expand business activities and create jobs.
The Federal Reserve is said to be the central bank that has the function of managing and controlling the supply of money in the economy.
Use of discount rate by Federal Reserve
Federal Reserve decreases the discount rate is expansionary monetary policy. It means people would find it less costly to borrow money as well as higher availability of funds with banks, which increases the money supply.
Use of reserve requirement by Federal Reserve
Reserve requirement of banks is reduced to enhance the liquidity state of banks. It again provides higher funds to lend people as loans.
Impacts on employment
Hence, it would hamper investments by businesses due to a higher rate of interest, which would reduce business activities and employment rates as well.
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