If a contractionary monetary policy is adopted,________.
A) real output will increase
B) the price level will fall
C) the demand for labor will increase
D) the real interest rate will fall

Question

Quizplus · Accepted Answer

Contractionary monetary policy involves reducing the money supply and increasing interest rates. This makes borrowing more expensive, which reduces spending and ultimately leads to a decrease in aggregate demand. As a result, prices tend to fall (deflation).

If a Contractionary Monetary Policy Is Adopted,________