If the Fed conducts a contractionary monetary policy,________.
A) banks will make fewer loans
B) bank deposits will increase
C) demand for labor will increase
D) the nominal interest rate will decrease

Question

Quizplus · Accepted Answer

Contractionary monetary policy involves a decrease in the money supply, which increases the cost of borrowing and reduces economic activity. As a result, banks will make fewer loans, as lending becomes less profitable.

If the Fed Conducts a Contractionary Monetary Policy,________