If contractionary monetary policy is used,which of the following would be most likely to enhance the effect of the contractionary policy on aggregate demand?

Question

Quizplus · Accepted Answer

Contractionary monetary policy reduces the money supply and increases interest rates, which in turn leads to a decrease in aggregate demand. When interest rates increase, it makes the domestic currency more attractive resulting in an appreciation of the exchange rate, making exports more expensive and decreasing net exports. Therefore, option A is the correct choice.

If Contractionary Monetary Policy Is Used,which of the Following Would