Latest WGU Global-Economics-for-Managers C211 Practice Questions By Hess

In Global Economics for Managers, the Federal Reserve increases the money supply primarily through open market operations, specifically by buying government bonds from the public, making option C correct.

When the Fed purchases government securities, it pays banks and other sellers by crediting their reserves. This action increases the amount of reserves in the banking system, enabling banks to extend more loans. As lending expands, the money supply grows through the money multiplier process.

Option A would decrease the money supply. Option B tightens monetary conditions. Option D reduces banks' ability to lend.

Managers should understand this mechanism because changes in the money supply affect interest rates, investment, exchange rates, and aggregate demand. Therefore, option C accurately describes how the Fed increases the money supply.