Economics Aggregate Demand And Supply Questions
Contractionary monetary policy refers to the actions taken by a central bank or monetary authority to reduce the money supply and slow down economic growth. This policy is typically implemented by increasing interest rates, reducing government spending, and selling government securities in the open market. The aim of contractionary monetary policy is to control inflation, stabilize prices, and prevent an overheating economy. By reducing the availability of credit and increasing the cost of borrowing, contractionary monetary policy aims to decrease consumer spending and investment, which in turn reduces aggregate demand and slows down economic activity.