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) decrease the reserve requirements imposed on commercial banks.
B) purchase U.S. government securities and other financial assets in the open market.
C) decrease the interest rate on loans extended to banks and other financial institutions.
D) increase the interest rate paid on excess reserves encouraging banks to hold excess reserves rather than extend more loans.