Monetary policy involves all of the following EXCEPT:
A) increases in bank reserves.
B) increases in interest rates.
C) increases in personal taxes.
D) increase in buying securities.

Question

Quizplus · Accepted Answer

Monetary policy involves actions taken by the central bank to influence the money supply and interest rates in order to achieve macroeconomic goals such as price stability, full employment, and economic growth. Increases in bank reserves (A) and buying securities (D) are tools used by central banks to increase the money supply and reduce interest rates. Increases in interest rates (B) are used to reduce inflationary pressures in the economy. However, increases in personal taxes (C) are not a tool of monetary policy but rather a tool of fiscal policy which involves the government's use of taxation and spending to achieve macroeconomic goals.

Monetary Policy Involves All of the Following EXCEPT