Contractionary monetary policy causes
A)aggregate demand to rise and the price level to rise.
B)aggregate demand to fall and the price level to fall.
C)aggregate demand to rise and the price level to fall.
D)aggregate demand to fall and the price level to rise.

Question

Quizplus · Accepted Answer

Contractionary monetary policy typically involves increasing interest rates or reducing the supply of money in the economy, which decreases consumer and business spending. This leads to a fall in aggregate demand and, consequently, a decrease in the price level as demand for goods and services declines.

Contractionary Monetary Policy Causes