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:

Desert

Ecological biome characterized by a limited amount of rainfall; deserts have hot days and cool nights.

Plants And Animals

Distinct groups of living organisms; plants are primarily photosynthetic eukaryotes, while animals are multicellular eukaryotes with varied dietary habits.

Latitude

A measurement of distance in degrees north or south of the Earth's equator.

Temperature

a measure of the warmth or coldness of an object or substance with reference to some standard value.