A restrictive monetary policy reduces investment spending and shifts the economy's aggregate demand curve to the right.

Question

Quizplus · Accepted Answer

A restrictive monetary policy, which involves raising interest rates and reducing the money supply, typically reduces investment spending as borrowing becomes more expensive. This shift in spending can lead to a decrease in aggregate demand, shifting the curve to the left, not the right.

A Restrictive Monetary Policy Reduces Investment Spending and Shifts the Economy's