In which type of policy actions by the Fed can liquidity "dry up"?

Question

Quizplus · Accepted Answer

When the Fed implements a tight money policy, they are increasing interest rates and decreasing the money supply. This can lead to a decrease in liquidity in the market, as there is less money available for borrowing and spending. In contrast, easy money policies involve lowering interest rates and increasing the money supply, which generally makes it easier for businesses and individuals to access liquidity. Decreasing the reserve requirement or the discount rate can also increase liquidity by making it easier for banks to lend money.

In Which Type of Policy Actions by the Fed Can