Restrictive monetary policy will:
A) Decrease the lending capacity for banks.
B) Reduce interest rates.
C) Cause a rightward shift of aggregate demand.
D) Raise the equilibrium price level.

Question

Quizplus · Accepted Answer

Restrictive monetary policy involves reducing the money supply by increasing interest rates or decreasing the availability of credit. This will decrease the lending capacity for banks as they will have less money to lend out.

Restrictive Monetary Policy Will