A contractionary monetary policy of the Federal Reserve tends to

Question

Quizplus · Accepted Answer

A contractionary monetary policy typically involves increasing interest rates or reducing the supply of money in the economy. This makes borrowing more expensive, which can reduce consumption and investment spending. However, higher interest rates can attract foreign investors looking for higher returns, increasing the demand for the dollar. This can lead to an appreciation of the dollar, making U.S. exports more expensive for foreign buyers and imports cheaper for U.S. consumers, thus decreasing net exports of goods and services. Choices A, B, and C are generally effects of an expansionary monetary policy, not a contractionary one.

A Contractionary Monetary Policy of the Federal Reserve Tends to