Time for speakingWork in a group, and have debates on the following issues.Some people believe that political leaders must have a higher acqualific … Fed implements Contractionary activity by doing the below three things: Government Securities sell on the open market. Contractionary monetary policy is a form of economic policy used to fight inflation which involves decreasing the money supply in order to increase the cost of borrowing which in turn decreases GDP and dampens inflation.. One popular method of controlling inflation is through a contractionary monetary policy. Definition: A contractionary monetary policy is an macroeconomic strategy used by a central bank to decrease the supply of money in the market in an effort to control inflation. C An increase in the aggregate level of income and a decrease in the aggregate level of spending. The latter works in reverse, namely encouraging economic growth and inflation. Contractionary Monetary Policy . B A decrease in the aggregate level of income and spending. The goal of a contractionary policy … *Response times vary by subject and question complexity. Contractionary monetary policy is a contrast to expansionary monetary policy. Q: Andrea has a budget of £21 to spend on toothbrushes and tooth paste. Raising the discount rate. Which action taken by a central bank would reflect contractionary monetary policy? The usual goals of monetary policy are to achieve or maintain full employment, to achieve or maintain a high rate of economic growth, and to stabilize prices and wages.Until the early 20th century, monetary policy was thought by most experts to be of little use in influencing the economy. Contractionary Activities include contracting or decreasing the supply of money in the economy. D. Contractionary monetary policy is the type of economic policy that is basically used to deal with inflation and it also involves minimizing the fund’s supply in order to bring an enhancement in the cost of borrowings which will ultimately lower the gross domestic product and moderate or decrease inflation too. The Federal Reserve and the government control the money supply by adjusting interest rates, purchasing government securities on the open market, and adjusting government spending. Monetary policy refers to the actions undertaken by the nation’s central bank to control the money supply to achieve macroeconomic goals and sustainable economic growth. The Effect of Monetary Policy on Interest Rates. What would the effect of contractionary monetary policy be on the aggregate level of income and spending? A An increase in the aggregate level of income and spending. Median response time is 34 minutes and may be longer for new subjects. A contractionary monetary policy could seek to close this gap by shifting the aggregate demand curve to AD 2. Monetary policy can either be expansionary or contractionary. He does not receive any utility... A: Hi Student, thanks for posting the question. Try It. The monetary … In Panel (b), the Fed sells bonds, shifting the supply curve for bonds to S 2 and lowering the price of bonds to P b 2. Central banks adopt it during an economic contraction or recession. The lower price of bonds means a higher interest rate, r 2, as shown in Panel (c). Raising the reserve ratio requirement. Contractionary monetary policy on the part of the Fed results in A. a decrease in the money supply, an increase in interest rates, and a decrease in GDP. So how does a central bank “raise” interest rates? When the economy is under inflationary pressures, the central bank (in US, the Federal Reserve) decreases the money supply by either increase in the discount rate … B. 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