Which of the following is an example of contractionary monetary policy?
A
The Fed lowers the reserve ratio.
B
The Fed lowers the discount rate.
C
The Fed increases taxes on household income.
D
The Fed decreases spending on welfare programs.
E
The Fed sells Treasury securities to commercial banks.
Correct Answer: The Fed sells Treasury securities to commercial banks.
E-Selling securities pulls excess reserves out of the banking system, decreasing the money supply.