The Federal Reserve can increase high powered money by 1Lowe

The Federal Reserve can increase high powered money by:

1.Lowering leverage ratios

2.Selling assets to the banking system

3.Buying assets from the banking system

4.Increasing risk based capial requirements

Solution

High powered money is the sum of bank reserves and currency held by the public.
1. Option 1. is incorrect. Lowering reserve ratios reduce high power money. High power money is inversely proportional to reserve ratios.
2. Option 2 is correct because selling assets to the bank increases high powered money because money is transferred from banks to the federal reserves to banks and public.
3. Option 3 is incorrect because buying asset reduces money with the federal reserve and increases money with the bank.

4. Option 4 is incorrect. Because increasing risk based capital requirement increases cash reserves requirement in banks which is to be used for unexpected losses and it does not go into Federal Reserve.

Best of Luck. God Bless