The Fed, at the end of 2015, announced its intent to start "normalizing" monetary policy and returning short-term interest rates to their normal range. Its normalization plan had two major tools,
A) taxation and spending.
B) discount rate and reserve requirements.
C) quantitative easing and open-market operations.
D) raising the interest on excess reserves held at Fed banks and quantitative tightening.

Question

Quizplus · Accepted Answer

The two major tools for the Fed's normalization plan were raising the interest on excess reserves held at Fed banks (quantitative easing) and quantitative tightening. This involved selling off some of the assets it had acquired during the recession (quantitative easing) and reducing the money supply by decreasing the amount of cash banks can hold in reserves (quantitative tightening).

The Fed, at the End of 2015, Announced Its Intent