Which of the following is an example of a contractionary monetary policy?
A)Reduction in the amount of transfer payments made to poor families
B)Purchase of U.S.government securities in the open market
C)Increase in the discount rate
D)Decrease in the required reserve ratio
E)Increase in the tax rate

Question

Quizplus · Accepted Answer

An increase in the discount rate means that banks have to pay more interest on the loans they get from the Federal Reserve, which makes it less attractive for them to borrow money and lend it out to consumers and businesses. This decrease in the availability of credit makes it harder for the economy to expand, and therefore represents a contractionary monetary policy.

Which of the Following Is an Example of a Contractionary