Multiple Choice

involves a contraction of the nation's money supply.
necessarily reduces the size of government.
is aimed at reducing aggregate demand and thus achieving price stability.
is expressly designed to expand real GDP.

1 answer

Based on the options provided, the statement that best describes contractionary monetary policy is:

"is aimed at reducing aggregate demand and thus achieving price stability."

Contractionary monetary policy involves reducing the money supply to decrease inflation and stabilize prices by lowering aggregate demand.