Select the situation below where contractionary monetary policy would be needed. The inflation rate is growing rapidly. O People are reluctant to take out loans. O People are holding onto their money rather than spending it. O Individuals reduce the frequency with which they spend and deposit money in banks.

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24-11-2022
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Select the situation below where contractionary monetary policy would be needed. The inflation rate is growing rapidly. O People are reluctant to take out loans. O People are holding onto their money rather than spending it. O Individuals reduce the frequency with which they spend and deposit money in banks.

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dubeyshailja64 dubeyshailja64 · Answer 1 · 2022-11-29T09:10:59+01:00

The situation below where the contractionary monetary policy would be needed is The inflation rate is growing rapidly. Thus the correct option is A.

What is inflation?

The term "inflation" refers to a situation where prices of products and services increase for a period of time, disrupting customer purchasing decisions due to the high cost. it might result in a decline in a currency's purchasing power, inflation seeks to depreciate a currency.

When the rate of inflation is high, there will be less demand for products and services because high-interest rates will prevent customers from spending money, which also has an impact on the overall economy of the nation. High inflation will reduce an individual's purchasing power.

In order to combat inflation, a contractionary monetary policy is one that slows down the rate of monetary expansion.

Therefore, option A is appropriate.

Learn more about inflation, here:

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