Other things equal, monetary policy to offset a contractionary gap will tend to
A)Increase the money supply and lower interest rates
B)Increase the money supply and increase interest rates
C)Decrease the money supply and lower interest rates
D)Decrease the money supply and increase interest rates

Question

Other things equal, monetary policy to offset a contractionary gap will tend to​
A)​Increase the money supply and lower interest rates
B)​Increase the money supply and increase interest rates
C)​Decrease the money supply and lower interest rates
D)​Decrease the money supply and increase interest rates

Quizplus · Accepted Answer

To offset a contractionary gap, monetary policy typically involves increasing the money supply to lower interest rates, which encourages borrowing and investment, stimulating economic activity.

Other Things Equal, Monetary Policy to Offset a Contractionary Gap