In the short run,contractionary monetary policy ________ real gross domestic product (GDP),________ unemployment,and ________ the price level.
A) raises; lowers; raises
B) raises; raises; raises
C) lowers; lowers; raises
D) lowers; raises; lowers
E) raises; lowers; lowers

Question

Quizplus · Accepted Answer

Contractionary monetary policy involves decreasing the money supply and increasing interest rates. This leads to a decrease in aggregate demand and ultimately lowers real GDP. As a result of lower economic activity, unemployment rises. However, the decrease in aggregate demand also puts downward pressure on prices, which lowers the price level.

In the Short Run,contractionary Monetary Policy ________ Real Gross Domestic