<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>Perhaps decrease the discount rate? Im not really sure.</p>
<p>Thank you, dark ruler, but I think that decreasing the discount rate would increase the money supply (encouraging banks to borrow more from the Fed and raising the level of reserves)...I think that I'm going to take ADad's suggestion to raise the reserve requirements (lowering the money supply) and then buy bonds (increasing the money supply), enough to leave the net supply unchanged...it seems to make sense to me, so thank you, ADad!</p>
<p>^^ That answer sounds right, but be sure to specify who you are buying the bonds from...commercial banks, not the public.</p>
<p>Considering the fed only has direct control over three things (reserve requirement, discount rate, and bonds) all of which affect the money supply, you would have to pick some combination of these things for an answer.</p>
<p>^^ Which was said in sparrow's post...raise reserve requirement and buy bonds...</p>