<p>Okay, so there's a macroeconomics question I'm clueless about, and I was wondering if you guys could help me, so here it is:</p>
<p>"Explain how the Fed could increase the level of bank reserves in the economy while leaving the money supply unchanged."</p>
<p>I know that the Fed could raise the reserve requirements, but that would lower the money supply...anyone?? Help!</p>
<p>Change the required reserve ratio.</p>
<p><em>edit</em> on second thought, that wouldn't work. Only thing I can think of is to reduce or increase the physical money supply and then change the required reserve ratio to compensate.</p>
<p>Increase the federal funds rate, and the discount rate, which is the rate that banks pay when they get loans to and from each other to meet the reserve ratio. Banks might get more conservative with lending thus increasing the amount of money in the vault.</p>
<p>Thanks for your help, guys - as you can see, I'm not an econ expert and need all the advice I can get, haha. I think I'm just going to say that the Fed can raise the reserve requirements (which lowers money supply) and then buy bonds to the extent that it increases the money supply by the same amount by which the raised requirements lowered it - don't know for sure if it's correct, but it seems to make sense to me - thanks to ADad for explaining it to me!</p>