When the Federal Reserve sells bonds, it is implementing
A) quantitative easing.
B) expansionary monetary policy.
C) tight money policy.
D) easy money policy.

Question

Quizplus · Accepted Answer

Selling bonds causes a decrease in the money supply and makes it harder to borrow money, which is the basis of tight money policy. Quantitative easing involves the purchase of bonds to increase the money supply, so A is incorrect. Expansionary monetary policy involves increasing the money supply, usually through the purchase of bonds, so B and D are also incorrect.

When the Federal Reserve Sells Bonds, It Is Implementing