When a central bank uses contractionary monetary policy, _______ is most likely to occur.
A) disinflation
B) inflation
C) deflation
D) stagflation

Question

Quizplus · Accepted Answer

Contractionary monetary policy is designed to decrease the amount of money in circulation, which can lead to a decrease in consumer spending and a decrease in prices. This can result in disinflation, a slowing of price increases, or even a decrease in prices (deflation), depending on the severity of the policy. It is unlikely to lead to inflation or stagflation, which occur when there is too much money in circulation.

When a Central Bank Uses Contractionary Monetary Policy, _______ Is