Which of the Following Actions Should the Central Bank Take

Multiple Choice

Which of the following actions should the central bank take if monetary authorities want to reduce the supply of money to slow the rate of inflation?

A) Sell government bonds, reducing money supply, increasing interest rates and slowing aggregate demand.
B) Buy government bonds, reducing money supply, increasing interest rates and slowing aggregate demand.
C) Decrease the discount rate, lowering interest rates, causing both costs and prices to fall.
D) Increase taxes, reducing costs, causing prices to fall.