PRC-3 · Chapter 17 · Question 20 of 20
Which of the following actions by a government would lead to an immediate and direct reduction in the broad money supply?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Increasing the interest rates offered on National Savings certificates
Explanation
If the government offers high interest on savings schemes, the public withdraws cash from commercial circulation to lock it in state savings, reducing the broad money supply.
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