If the Federal Reserve wishes to slow an overheating economy, which of the following would be a contractionary monetary policy action?

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Multiple choice — select the best answer

ADecrease the reserve requirement
BSell U.S. Treasury securities in the open market
CLower the federal funds rate target
DReduce the discount rate

✓ Correct answer: B. Sell U.S. Treasury securities in the open market Selling Treasuries in the open market removes reserves from the banking system (contractionary). Lowering rates, reducing requirements, and cutting the discount rate are all expansionary policies.

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Topic: Economic Factors

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If the Federal Reserve wishes to slow an overheating economy, which of the following would be a contractionary monetary policy action?

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