Contractionary monetary policy to prevent real GDP from rising above potential real GDP would cause the inflation rate to be ________ and real GDP to be ________.
A)higher; higher
B)higher; lower
C)lower; higher
D)lower; lower

Question

Quizplus · Accepted Answer

Contractionary monetary policy, aimed at reducing inflation and slowing down an overheating economy, would lead to lower inflation rates as demand decreases. Additionally, it would result in lower real GDP as the economy cools down and growth slows.

Contractionary Monetary Policy to Prevent Real GDP from Rising Above