Question : ___________ is a process where the central bank reduces the money supply in the economy.
Option 1: Contractionary monetary policy
Option 2: Expansionary monetary policy
Option 3: Quantitative easing
Option 4: Open market operations
Correct Answer: Contractionary monetary policy
Solution : The correct answer is (a) Contractionary monetary policy.
Contractionary monetary policy refers to the actions taken by the central bank to reduce the money supply in the economy, typically with the aim of controlling inflation and curbing excessive economic growth.
Contractionary monetary policy is employed when there is a need to control inflationary pressures or to address an overheating economy with excessive credit growth.
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