Which of the following would come from contractionary monetary policy?Multiple choice question.An decrease in the money supplyAn decrease in the interest ratesAn decrease in government spendingAn decrease in taxes
Question
Which of the following would come from contractionary monetary policy?Multiple choice question.An decrease in the money supplyAn decrease in the interest ratesAn decrease in government spendingAn decrease in taxes
Solution
The correct answer is "An decrease in the money supply".
Contractionary monetary policy is a type of policy that is used by a country's central bank to decrease the amount of money in the economy. This is often done by increasing interest rates, which makes borrowing more expensive and therefore reduces the amount of money circulating in the economy.
However, the other options are not correct in this context.
Decreasing interest rates is typically a tool of expansionary monetary policy, not contractionary.
Decreasing government spending and decreasing taxes are tools of fiscal policy, not monetary policy. Fiscal policy is managed by the government (not the central bank) and involves changing tax rates and levels of government spending to influence the economy.
Similar Questions
Which of the following will result from contractionary monetary policy?Multiple select question.An increase in borrowing and spending.An increase in the interest rate.An increase in the price level.A reduction of aggregate demand.
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Contractionary monetary policy:Question 33Select one:a.deals with reduced government spending and/or increased taxes.b.results in increased domestic farm prices, export prices, and input prices.c.deals with increasing government spending and/or decreasing tax rates.d.deals with increasing money supply in the economy and/or decreasing interest rates.e.deals with decreasing money supply in the economy and/or increasing interest rates.
Suppose the Federal Reserve plans to conduct contractionary monetary policy during a period of increasing inflation. Which of the following is a policy that would promote this decision?Multiple choice question.Increase the interest rate paid on reservesDecrease the interest rate paid on reservesIncrease personal income taxesDecrease personal income taxes
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