Select the correct answer. which action can the federal reserve take to pursue a tight-money policy? a. raise tax rates on all taxpayers to increase revenues b. decrease the amount of money in the economy c. regulate trading between banks and customers d. prevent the government from running a deficit e. increase the amount of money in the economy

D. prevent the government from running a deficit

B. decrease the amount of money in the economy

Explanation:

The Fed is the executive organ responsible for the conduct of monetary policy. A restrictive monetary policy, common in periods of inflation, consists in reducing the monetary base, that is, the money in circulation in the economy. This is done by selling government bonds and increasing the rate of compulsory deposits that commercial banks must make with the Fed. Thus, the Fed decreases the amount of money in circulation and decreases inflation.

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