To counteract a positive demand shock,the Fed uses ______________ monetary policy,which __________________________.
A) contractionary;reduces both output and the price level
B) contractionary;reduces output and increases the price level
C) expansionary;increases both output and the price level
D) expansionary;reduces output and increases the price level

Question

Quizplus · Accepted Answer

Contractionary monetary policy is used to counteract a positive demand shock by reducing the money supply, which decreases aggregate demand, leading to a reduction in both output and the price level.

To Counteract a Positive Demand Shock,the Fed Uses ______________ Monetary