When looking at the money supply, you will find that this is controlled by the Fed. How do you think that an increase in the money supply will affect our economy?
Hi, Thank you for using Just Answer. The Fed increases the money supply by buying government bonds in the open market. When the Central Bank or the Fed increases money supply, banks are more willing to lend. Interest rates falls. Investments increases. Consumers are more willing to spend. With increase in sales, businesses purchase more raw material, hire more employees, and the economy becomes stronger. Reference: http://www.econlib.org/library/Enc/MoneySupply.html