If the Federal Reserve Wanted to Expand the Money Supply

Multiple Choice

If the Federal Reserve wanted to expand the money supply in order to increase output, it should

A) sell government bonds, which will increase the money supply; this will cause interest rates to fall and aggregate demand to rise.
B) buy government bonds, which will increase the money supply; this will cause interest rates to fall and aggregate demand to rise.
C) increase the discount rate, which will raise the market rate of interest; this will cause both costs and prices to rise.
D) decrease taxes, which will reduce costs and cause prices to fall.