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Monetary policy can either be expansionary or contractionary. 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.. Which of the following is a monetary policy action used to combat a recession? required reserve ratio. . alternatives . To fight rapid inflation in the economy. Contractionary fiscal policy: In contractionary fiscal policy, the government taxes more than it spends—either by increasing tax rates, decreasing spending, or both. Expansionary policy is used when the economy is under recession and unemployment rates are high. 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. contractionary policy. discount rate. Contractionary Policy as Fiscal Policy. The intersection of aggregate demand (AD 0) and aggregate supply (AS 0) occurs at equilibrium E 0. The goal of the contractionary fiscal policy is to slow growth to a healthy financial standard. Contractionary Fiscal Policy. To discourage individuals from spending. Suppose the macro equilibrium occurs at a level of GDP above potential, as shown in Figure 3. Explanation: why because its the government Expansionary monetary policy involves an increase in money supply which in turn increases aggregate demand. Contractionary Policy: A contractionary policy is a kind of policy which lays emphasis on reduction in the level of money supply for a lesser spending and investment thereafter so as to slow down an economy. cutting taxes. Contractionary fiscal policy is the opposite of expansionary fiscal policy. The contractionary policy is used as a fiscal policy in the event of fiscal recession, to raise taxes or decrease real government expenditures. contractionary policy . In order to implement expansionary policy, the government and Central Bank must _____ government spending, _____ taxes, and _____ interest rates. 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 … What is contractionary policy used for? This type of fiscal policy is best used during times of economic prosperity. This borrowing will most likely impact the demand for money, interest rate, ... Congress prefers to leave fiscal policy decisions to the Federal Reserve. A contractionary monetary policy is a type of monetary policy that is intended to reduce the rate of monetary expansion to fight inflation Inflation Inflation is an economic concept that refers to increases in the price level of goods over a set period of time. increasing the money supply. raising taxes. What is a Contractionary Monetary Policy? This ranges from 2% to 3% per year. answer choices . decreasing the money supply. Fiscal policy can also be used to slow down an overheating economy. What is contractionary policy used for? monetary policy. Goal of the contractionary fiscal policy is used when the economy is under recession and unemployment rates are.... The following is a monetary policy action used to slow down an economy. 2 % to 3 % per year the macro equilibrium occurs at equilibrium 0... 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