ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Contractionary. A contractionary policy increases interest rates and limits the outstanding money supply to slow growth and decrease inflation, where the prices of goods and services in an economy rise and reduce the purchasing power of money.

Detailed explanation-2: -Contractionary monetary policy aims to slow down economic growth or even contract the economy in order to keep inflation at bay. It dampens growth primarily by raising interest rates and reducing the supply of money. Higher interest rates cause consumers to reduce spending, especially through the use of credit cards.

Detailed explanation-3: -Contractionary monetary policy is when a central bank uses its monetary policy tools to fight inflation. It’s how the bank slows economic growth. Inflation is a sign of an overheated economy. It’s also called a restrictive monetary policy because it restricts liquidity.

Detailed explanation-4: -Contractionary policy is used to control inflation. Expansionary fiscal policy is said to be in action when the government increases the spending and lowers tax rates for boosting economic growth. This increases consumption as there is a rise in purchasing power.