Question

suppose the federal reserve decides to decrease the money supply in order to lower inflation. in three or four sentences, explain if this is an expansionary or contractionary policy.

Answer 1

Answer:

What will happen is that as the supply of capital is depleted, borrowing costs will rise, reducing the amount of money available for investment and customer spending. This will result in a general decrease in demand for products and businesses, resulting in a decrease in costs, or, more commonly, a smaller increase in costs.

Explanation:

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Answer 2

If the Fed decided that it would be best to decrease money supply so that inflation would fall, this is a Contractionary policy.

What is a contractionary monetary policy?

This refers to actions by the Fed that are aimed at reducing the supply of money in the economy.

The hope is that the rate of inflation falls because fewer people will have enough money to buy goods and so suppliers will decrease prices.

Find out more on monetary policy at https://brainly.com/question/13926715.

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