Final answer:
The Federal Reserve's decision to increase the reserve rate is an example of monetary policy, which adjusts the money supply in the economy by changing how much money banks must hold in reserve.
Step-by-step explanation:
When the Federal Reserve decides to increase the reserve rate percent, it is exercising its power to conduct monetary policy. This action affects the amount of money that banks have available to lend, as a higher reserve requirement means banks must hold more funds in reserve rather than lending them out. This can slow the growth of the money supply, which can affect interest rates and overall economic activity. The goal of such actions by the Fed might be to curtail inflation or to manage the economic cycle more generally.
Contrast this with fiscal policy, which involves government spending and taxation decisions made by Congress and the Executive branch.
Thus, when the Fed increases the reserve rate, it is not practicing fiscal policy, nor is it directly targeting inflation or structural issues within the economy. It is attempting to change the economic conditions through adjustments in the money supply, which is the essence of monetary policy.