Contractionary monetary policy
A)leads to disinflation and makes the short-run Phillips curve shift right.
B)leads to disinflation and makes the short-run Phillips curve shift left.
C)does not lead to disinflation but makes the short-run Phillips curve shift right.
D)does not lead to disinflation but makes the short-run Phillips curve shift left.

Question

Quizplus · Accepted Answer

Contractionary monetary policy typically increases interest rates and reduces the money supply, which can lead to lower inflation rates, or disinflation. This policy can also make the short-run Phillips curve shift left, as it represents a trade-off between inflation and unemployment, indicating that lower inflation (disinflation) may come at the cost of higher unemployment in the short run.

Contractionary Monetary Policy