Question

Which of the following tools is an example of monetary policy?

A) changing reserve requirements

B) borrowing money through deficit spending

C) increasing government spending

D) reducing income taxes

Answer 1

Answer:

Explanation:

B C and D have become tools that have been tried.

Deficit spending is a budget/government policy. Its use should be very limited.

Same with Increased Government Spending. FDR was the master at controlled government spending.

Reducing income taxes is another government policy.

So only A is an example of monetary policy. This is a regulation imposed on the Banks by the Federal Reserve.

Answer 2

A financial tool which is an example of monetary policy is: A. changing reserve requirements.

What is a monetary policy?

A monetary policy is also known as fiscal policy and it can be defined as the strategic use of government revenues and expenditures, so as to influence and control macroeconomic conditions such as:

• Aggregate demand (AD)

• Employment within a country.

• Money supply

• Inflation

In this scenario, a financial tool which is an example of monetary policy is the change of reserve requirements by the Federal Reserve System (Fed) because it decreases money supply and increases the cost of credit and vice-versa.

Read more on monetary policy here: brainly.com/question/13926715

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