Other things equal, a restrictive monetary policy during a period of demand-pull inflation will
A)lower the interest rate, increase investment, and reduce net exports.
B)lower the price level, increase investment, and increase aggregate demand.
C)increase productivity, aggregate supply, and real output.
D)increase the interest rate, reduce investment, and reduce aggregate demand.

Question

Quizplus · Accepted Answer

A restrictive monetary policy typically involves increasing interest rates to curb inflation. Higher interest rates discourage borrowing and investment, leading to a reduction in aggregate demand.

Other Things Equal, a Restrictive Monetary Policy During a Period