Contractionary monetary policy occurs when
A) a central bank acts to decrease the money supply in an effort to control an economy that is expanding too quickly.
B) Congress and the president increase taxes in an effort to control an economy that is expanding too quickly.
C) Congress and the president decrease taxes in an effort to stimulate the economy.
D) a central bank acts to increase the money supply in an effort to stimulate the economy.
E) a central bank acts to increase government spending in an effort to stimulate the economy.

Question

Quizplus · Accepted Answer

Contractionary monetary policy involves decreasing the money supply in order to slow down an economy that is growing too quickly and experiencing inflationary pressures. This is typically done by a central bank through actions such as raising interest rates or decreasing the availability of credit.

Contractionary Monetary Policy Occurs When