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Explain how the Federal Reserve may use the discount rate and the reserve requirement to increase the money supply. What impact should these actions have on employment and why? (5 points)

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Final answer:

The Federal Reserve can use the discount rate and reserve requirement to increase the money supply, impacting employment positively.


Explanation:

The Federal Reserve may use the discount rate and reserve requirement to increase the money supply. When the Fed lowers the discount rate, banks can borrow money at a lower cost. Lowering the reserve requirement means banks can lend more of their deposits, increasing the money supply. These actions should stimulate economic activity and potentially lower unemployment rates as businesses have easier access to capital for expansion and hiring.


Learn more about Monetary policy and its impact on the economy here:

https://brainly.com/question/41686613


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