The Federal Reserve alters the amount of the nation's money supply by a. controlling the assets of the nation's largest banks. b. minting coins and printing currency that is distributed to banks. c. manipulating the size of excess reserves held by commercial banks. d. reducing the liabilities of the banking system.

Answer: C. manipulating the size of excess reserves held by commercial banks.

Explanation:

The federal reserve alters the amount in circulation in the country by manipulating the size of reserve held by commercial banks. The responsibility for regulating the nation's money supply requires the Federal Reserve to influence the amount of reserve funds available to banks and thus the level and direction of short-term interest rates.

When huge reserves are released to banks, there is a drop on interest rates for loans which will encourage more people to apply for loans thus increasing the currencies in supply.