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:

Social Factors

Aspects of society and its social structure that influence individual behavior, attitudes, and interactions.

Stress

The term used to describe the physical, emotional, cognitive, and behavioral responses to events that are appraised as threatening or challenging.

Stereotype Threat

Condition in which being made aware of a negative performance stereotype interferes with the performance of someone that considers himself or herself part of that group.

Self-fulfilling Prophecy

A belief or expectation that an individual holds, consciously or unconsciously, that manifests because the individual believes it to be true.