If the Fed Wanted to Shift to a Restrictive Monetary

Multiple Choice

If the Fed wanted to shift to a restrictive monetary policy and reduce the money supply, it could

A) increase the interest rate paid on excess reserves encouraging banks to extend more loans.
B) decrease the interest rate paid on excess reserves encouraging banks to extend more loans.
C) decrease the interest rate paid on excess reserves encouraging banks to hold excess reserves rather than extend more loans.
D) increase the interest rate paid on excess reserves encouraging banks to hold excess reserves rather than extend more loans.