Macroeconomics

MCQ - 207-4217

Question:

Which of the following is an example of contractionary monetary policy?

The Fed lowers the reserve ratio.
The Fed lowers the discount rate.
The Fed increases taxes on household income.
The Fed lowers the discount rate.
The Fed sells Treasury securities to commercial banks.

Correct Answer: E

Explanation:

Selling securities pulls excess reserves out of the banking system, decreasing the money supply.

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