Which of the Following Best Describes How Contractionary Monetary Policy

question 142

Multiple Choice

Which of the following best describes how contractionary monetary policy affects the aggregate demand curve in the aggregate demand-aggregate supply model?

• A) Contractionary monetary policy directly pulls money out of the loanable funds market.This lowers the interest rate,which provides a larger incentive for firms to invest.Investment is a component of aggregate demand,so this shifts aggregate demand to the right.
• B) Contractionary monetary policy directly puts money into the loanable funds market.This lowers the interest rate,which provides a larger incentive for firms to invest.Investment is a component of aggregate demand,so this shifts aggregate demand to the right.
• C) Contractionary monetary policy directly puts money into the loanable funds market.This raises the interest rate,which provides a larger incentive for firms to invest.Investment is a component of aggregate demand,so this shifts aggregate demand to the right.
• D) Contractionary monetary policy directly puts money into the loanable funds market.This lowers the interest rate,which provides a larger incentive for firms to invest.Investment is a component of aggregate demand,so this shifts aggregate demand to the left.
• E) Contractionary monetary policy directly pulls money out of the loanable funds market.This raises the interest rate,which provides a lesser incentive for firms to invest.Investment is a component of aggregate demand,so this shifts aggregate demand to the left.

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Definitions:

FLSA

The Fair Labor Standards Act, U.S. legislation that sets standards for minimum wage, overtime pay, and child labor protections.

Exempt Status

A classification under labor laws that categorizes employees who are exempt from overtime pay and/or minimum wage requirements, typically based on the type of work they perform.

Job Responsibilities

Specific duties and tasks that an employee is expected to perform as part of their role within an organization.

Davis-Bacon Act

A United States federal law that requires paying the local prevailing wages on public works projects for laborers and mechanics.