Which kind of monetary policy would you expect in response to high inflation?

A. Either could be deployed
B. Contractionary
C. Neither
D. Expansionary

Question

29-07-2024
Business

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Which kind of monetary policy would you expect in response to high inflation?

A. Either could be deployed
B. Contractionary
C. Neither
D. Expansionary

Sagot :

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GinnyAnsweridn GinnyAnsweridn · Answer 1 · 2024-07-29T17:11:33-04:00

Final answer:

Contractionary monetary policy is implemented to tackle high inflation by restricting economic growth and stabilizing prices.

Explanation:

Contractionary monetary policy would be expected in response to high inflation. This policy aims to slow down economic growth and lower inflation rates by reducing the money supply or increasing interest rates.

Contractionary monetary policy is used to counteract high inflationary pressures to prevent the economy from overheating and experiencing distortions in asset values.

For example, if the economy is experiencing inflation above the target rate, central banks may implement contractionary measures to stabilize prices and maintain economic stability.

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