quiz\nquestion 4 of 6\nwhat should the central bank do to implement contractionary policy?\nincrease…

quiz\nquestion 4 of 6\nwhat should the central bank do to implement contractionary policy?\nincrease government spending.\ndecrease taxes.\ndecrease interest rates.\nincrease interest rates.

quiz\nquestion 4 of 6\nwhat should the central bank do to implement contractionary policy?\nincrease government spending.\ndecrease taxes.\ndecrease interest rates.\nincrease interest rates.

Answer

Brief Explanations:

Contractionary policy aims to reduce aggregate demand. Increasing interest - rates makes borrowing more expensive, reducing investment and consumption, thus curbing economic activity. Government spending and tax changes are fiscal policy tools, not central - bank monetary policy tools for contractionary policy. Decreasing interest rates is expansionary, not contractionary.

Answer:

D. Increase interest rates.