If the Fed adopts a contractionary monetary policy, eventually we can expect _____
A) aggregate demand to increase.
B) short-run aggregate supply to decrease.
C) interest rates to decrease.
D) planned investment expenditures to decrease.
E) real gross domestic product to increase.

Question

Quizplus · Accepted Answer

A contractionary monetary policy involves reducing the money supply and increasing interest rates to slow down inflation. This makes borrowing more expensive and reduces planned investment expenditures as businesses and investors may not want to borrow as much. Therefore, the correct answer is D.

If the Fed Adopts a Contractionary Monetary Policy, Eventually We