Everything else held constant,an autonomous monetary policy tightening ________ aggregate ________.
A)increases;demand
B)decreases;demand
C)decreases;supply
D)increases;supply

Question

Quizplus · Accepted Answer

When there is an autonomous monetary policy tightening, interest rates increase. The increase in interest rates reduces investment and consumption spending, leading to a decrease in aggregate demand. Therefore, option B is the correct answer. Option A is incorrect because an increase in aggregate demand would result from a monetary policy loosening. Option C is incorrect because a decrease in supply would result from factors such as natural disasters or a decrease in productivity. Option D is incorrect because an increase in supply would result from factors such as technological advancements or an increase in the labor force.

Everything Else Held Constant,an Autonomous Monetary Policy Tightening ________ Aggregate