Which of the following is an example of a contractionary monetary policy?
A) Transfer payments to poor families are reduced.
B) The Bank of Canada buys government securities in the open market.
C) The bank rate is raised.
D) Government spending is reduced.

Question

Which of the following is an example of a contractionary monetary policy?  
A) Transfer payments to poor families are reduced. 
B) The Bank of Canada buys government securities in the open market. 
C) The bank rate is raised. 
D) Government spending is reduced.

Quizplus · Accepted Answer

Contractionary monetary policy refers to measures taken by the central bank to decrease the money supply and increase interest rates, leading to a decrease in aggregate demand and inflation. A raise in the bank rate (the interest rate at which the central bank lends to commercial banks) is an example of a contractionary monetary policy. Options A and D are examples of contractionary fiscal policies, while option B describes an expansionary monetary policy.

Which of the Following Is an Example of a Contractionary