When the Federal Reserve engages in contractionary monetary policy, which of the following will NOT be a result?
A) The money supply decreases.
B) Aggregate demand falls.
C) The Fed makes open market purchases.
D) The federal funds rate target is raised.

Question

Quizplus · Accepted Answer

Contractionary monetary policy involves the Federal Reserve taking actions to reduce the money supply and increase interest rates to slow down inflation. This typically includes selling government securities in open market operations (not purchasing them, which would be expansionary), and raising the federal funds rate target. Therefore, open market purchases are not a result of contractionary policy.

When the Federal Reserve Engages in Contractionary Monetary Policy, Which