When the Federal Reserve increases excess reserves to reduce interest rates and stimulate spending, it is said to engage in _____ policy.
A) tight money
B) expansionary fiscal
C) expansionary monetary
D) restrictive

Question

Quizplus · Accepted Answer

When the Federal Reserve increases excess reserves, it is engaging in expansionary monetary policy. This involves increasing the money supply and lowering interest rates to stimulate spending and promote economic growth. Tight money policy involves reducing the money supply and raising interest rates, while expansionary fiscal policy involves increasing government spending or reducing taxes to stimulate the economy. Restrictive policy is another term for tight money policy.

When the Federal Reserve Increases Excess Reserves to Reduce Interest