00:01
Hello and welcome.
00:02
So we are given four answer choices of which you are going to be choosing two to fill in the blank.
00:10
And this question is pertaining to a contractionary policy, which is actually pretty relevant in today's society where we are actually seeing some of these measures taking place before us.
00:20
So let's start with the first answer choice.
00:25
Contractionary monetary policy by the fed is often the result of the threat of inflation.
00:30
That is correct because contractionary policy is when the fed tries to reduce the amount of spending that's happening.
00:38
And you would never do this if inflation was already low.
00:41
You only do this when inflation is running rampant as it is right now.
00:44
And as a result, the fed has actually taken these contractionary money policies to reduce the inflation that's happening in today's own society.
00:52
So a is certainly very feasible in this scenario.
00:59
Secondly, it may involve a lower required reserve ratio.
01:02
Well, a lower required reserve ratio implies a greater money supply for the consumers.
01:11
And this promotes spending, which is actually the opposite of contractionary monetary policy...