The Fed would be practicing contractionary monetary policy if it caused a decrease in market interest rates.

Question

Quizplus · Accepted Answer

Contractionary monetary policy is usually used to temper inflation and slow down the economy. This is usually achieved by increasing interest rates, making it more expensive for businesses and consumers to borrow money. Therefore, if the Fed caused a decrease in market interest rates, it would be practicing expansionary monetary policy, which is used to stimulate economic growth.

The Fed Would Be Practicing Contractionary Monetary Policy If It