Monetary policy designed to slow down economic activity is called _____ monetary policy.A.inflationaryB.contractionaryC.expansionaryD.deflationary

Identifying the Correct Option

To determine the correct answer, we need to understand the types of monetary policy:

1. Inflationary Monetary Policy: Aimed at increasing economic activity, often associated with lowering interest rates.
2. Contractionary Monetary Policy: Designed to slow down economic activity, typically implemented by raising interest rates.
3. Expansionary Monetary Policy: Focused on stimulating the economy by increasing the money supply and lowering interest rates.
4. Deflationary Monetary Policy: Not a commonly used term in standard economic contexts, it generally refers to policies aimed at combating deflation.

Analyzing the Options

The question specifically asks for a policy that is intended to slow down economic activity.

• Contractionary monetary policy is explicitly designed to reduce spending in the economy by making credit more expensive.
• The other policies (inflationary, expansionary, and deflationary) do not fit this description as they aim to stimulate or increase economic activity.

Conclusion

Based on the analysis, the correct answer is B. contractionary.

Final Answer

B. contractionary