When a central bank aggressively tries to contain inflation via contractionary monetary policy, which condition is most likely to occur?
A) Disinflation
B) Inflation
C) Deflation
D) Underinflation

Question

Quizplus · Accepted Answer

When a central bank uses contractionary monetary policy to contain inflation, it reduces the money supply and increases interest rates, which discourages spending and investment. This in turn can lead to a decrease in demand for goods and services, causing prices to stabilize or even decrease slightly, leading to disinflation.

When a Central Bank Aggressively Tries to Contain Inflation Via