Answered

During a period of contractionary monetary policy,

A. The price level is decreased, which leads to a decrease in the money supply.
B. The rate of growth of the money supply is reduced, leading to a decrease in the price level.
C. The price level is increased, which leads to an increase in the money supply.
D. The rate of growth of the money supply is increased, leading to an increase in the price level.



Answer :

GinnyAnswer

Final answer:

Contractionary monetary policy involves reducing the money supply to raise interest rates and decrease borrowing, resulting in a lower price level and decreased real GDP.


Explanation:

Contractionary monetary policy refers to a set of actions undertaken by the central bank to decrease the money supply in the economy. This policy aims to raise interest rates, discourage borrowing for investment and consumption, and shift aggregate demand left. As a result, it leads to a lower price level and lower real GDP.


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