Which of the following explains why the money supply is not

Which of the following explains why the money supply is not completely controlled by the Federal Reserve?

a. The actions of private individuals and banks can increase or decrease the money supply via the money multiplier.

b. The president can issue an executive order that can increase or decrease the money supply.

c. The treasury has say over when the Federal Reserve can increase or decrease the money supply.

d. The actions of private individuals and banks can increase or decrease the money supply via the spending multiplier.

e. Congress has authority to veto any monetary policy enacted by the Federal Reserve.

Solution

a. The actions of private individuals and banks can increase or decrease the money supply via the money multiplier.

If there is an increase in reserves $100 and minimum reserve ratio is 10% then money multiplier is 1/.10 = 10. This implies that a change in reserves by $100 will increase the money supply by $1000. Therefore, The actions of private individuals and banks can increase or decrease the money supply via the money multiplier.