If the Federal Reserve wanted to reduce inflation, the most effective policies would be to

Question

Quizplus · Accepted Answer

Selling government securities would decrease the money supply, which should lead to a decrease in spending and ultimately reduce inflation. Raising reserve requirements would force banks to hold more money in reserve, which would also decrease the money supply and limit lending, ultimately reducing inflation. Therefore, choice A is the most effective policy option for reducing inflation.

If the Federal Reserve Wanted to Reduce Inflation, the Most