The Fed is said to tighten policy when it
A)decreases both the money growth and the federal funds rate.
B)decreases the money growth and increases the federal funds rate.
C)increases both the money growth and the federal funds rate.
D)increases the money growth and decreases the federal funds rate.

Question

Quizplus · Accepted Answer

Tightening policy refers to the Fed's actions to reduce the rate of growth of the money supply and increase the interest rate, known as the federal funds rate. Therefore, option B, which describes a decrease in money growth and an increase in the federal funds rate, is the correct answer.

The Fed Is Said to Tighten Policy When It