Which statement lists contractionary policies?
A) The Fed sells bonds, lowers the discount rate, and raises the reserve requirements.
B) The Fed sells bonds, lowers the discount rate, and lowers the reserve requirements.
C) The Fed purchases bonds, lowers the discount rate, and lowers the reserve requirements.
D) The Fed sells bonds, raises the discount rate, and raises the reserve requirements.

Question

Quizplus · Accepted Answer

Contractionary policies are those that decrease the money supply, increase interest rates, and decrease aggregate demand. Selling bonds, raising the discount rate, and raising the reserve requirements are all contractionary policies because they remove money from circulation and make it more expensive to borrow money. Choices A and B both include lowering reserve requirements, which is an expansionary policy. Choice C includes purchasing bonds, which is also an expansionary policy.

Which Statement Lists Contractionary Policies