Question

In the short run, contractionary monetary policy _________ real gross domestic product (GDP), _________ unemployment, and _________ the price level. a. lowers; lowers; raises b. lowers; raises; lowers c. raises; lowers; lowers d. raises; raises; raises e. raises; lowers; raises

Answer 1

Answer:

In the short run, contractionary monetary policy LOWERS real gross domestic product (GDP), RAISES unemployment, and LOWERS the price level.

• b. lowers; raises; lowers

Explanation:

When the Fed carries out a contractionary monetary policy, it will increase interest rates sell more securities in order to lower the money supply in the economy. Higher interest rates should lower the inflation rate (general price level), but it also cools down the economy which increases unemployment.

Answer 2

Answer: b. lowers; raises; lowers

Explanation:

Lowers; Raises; Lowers

contractionary monetary policy refers to the central bank reducing or decreasing the supply of money in the economy. A decrease in the supply of money lowers real Gross domestic product because Nominal Gross domestic product decreases, unemployment will raise and Prices will fall because the economy remains with less capital.