Which of the following actions would the Fed undertake if it wants to follow a more restrictive monetary policy?
A) Sell some of its holdings of government bonds.
B) Decrease government expenditures.
C) Urge the Treasury to sell more U.S. securities.
D) Reduce the reserve requirements.

Question

Quizplus · Accepted Answer

Selling some of its holdings of government bonds would decrease the money supply in the economy, leading to a more restrictive monetary policy. Decreasing government expenditures would be a fiscal policy action, not a monetary policy action. Urging the Treasury to sell more U.S. securities may have an impact on the economy, but it is not a direct action that the Fed could undertake. Reducing the reserve requirements would increase the money supply and lead to a less restrictive monetary policy.

Which of the Following Actions Would the Fed Undertake If