Which of the following monetary policies reduces aggregate demand and output?
A)A cut in the federal funds rate
B)An open market sale of government securities
C)A cut in the discount rate
D)A cut in the reserve requirement

Question

Quizplus · Accepted Answer

An open market sale of government securities by the central bank reduces the money supply in the economy, leading to higher interest rates. Higher interest rates make borrowing more expensive, which can reduce spending and investment, thereby reducing aggregate demand and output.

Which of the Following Monetary Policies Reduces Aggregate Demand and Output