Contractionary monetary policy causes ________.
A) the aggregate price level to rise
B) the aggregate price level to fall
C) real interest rates to fall
D) real output to rise

Question

Quizplus · Accepted Answer

Contractionary monetary policy decreases the money supply, which increases interest rates and decreases aggregate demand, leading to a decrease in the aggregate price level. Real interest rates would rise, not fall, and real output would fall, not rise, as a result of contractionary monetary policy.

Contractionary Monetary Policy Causes ________