Contractionary monetary policy:
A) increases aggregate demand.
B) increases aggregate supply.
C) works by discouraging investment spending.
D) decreases interest rates.

Question

Quizplus · Accepted Answer

Contractionary monetary policy works by increasing interest rates and reducing the money supply, which discourages investment spending and therefore slows down the economy. This ultimately leads to a decrease in aggregate demand. Therefore, option C is the correct choice.

Contractionary Monetary Policy