contractionary

Examples of contractionary in the following topics:

• How Fiscal Policy Relates to the AD-AS Model

  • Expansionary policy shifts the aggregate demand curve to the right, while contractionary policy shifts it to the left.
  • A contractionary fiscal policy is implemented when there is demand-pull inflation.
  • In pursuing contractionary fiscal policy the government can decrease its spending, raise taxes, or pursue a combination of the two.
  • Contractionary fiscal policy shifts the AD curve to the left.
  • Expansionary policy shifts the AD curve to the right, while contractionary policy shifts it to the left.

• Introduction to Monetary Policy

  • Monetary policy is referred to as either being expansionary or contractionary, where an expansionary policy increases the total supply of money in the economy more rapidly than usual, and contractionary policy expands the money supply more slowly than usual or even shrinks it.
  • Contractionary policy is intended to slow inflation in order to avoid the resulting distortions and deterioration of asset values, or to cool an overheating economy.
  • By contrast, a monetary authority will pursue a contractionary monetary policy when it considers inflation a threat.
  • Thus, contractionary monetary policy causes aggregate demand to fall, thereby reducing the rate of inflation. .

• The Effect of Restrictive Monetary Policy

  • Monetary policy is can be classified as expansionary or restrictive (also called contractionary).
  • Contractionary policy attempts to slow aggregate demand growth.
  • A central bank can enact a contractionary monetary policy several ways.
  • Another way to enact a contractionary monetary policy is to decrease the amount of discount window lending.
  • A final method of enacting a contractionary monetary policy is by increasing the reserve requirement.

• Managing the Business Cycle

  • If the economy needs to be slowed, these policies are referred to as contractionary and if the economy needs to be stimulated the policy prescription is expansionary.
  • Contractionary fiscal policy is opposite of the action taken in an expansionary purpose, and occurs when government spending is lower than tax revenue.
  • Similarly, contractionary monetary policy is the opposite of expansionary monetary policy and occurs when the supply of loanable funds is limited, to reduce the access and availability to relatively inexpensive credit.

• Executing Restrictive Monetary Policy

  • The central bank may initiate a contractionary or restrictive monetary policy to slow growth.
  • An active contractionary policy restricts the size of the money supply, increasing the interest rate.
  • In a contractionary policy regime, the Fed would increase the reserve requirement, thereby effectively restricting the funds that banks have available for loans.
  • In a contractionary policy regime, the Fed sells government securities from a bank in exchange for cash.
  • Contractionary monetary policy results in a reduction in the money supply, depicted as a leftward shift, which results in an increase in interest rates as well as a decrease in the quantity of loanable funds.

• Open Market Operations

  • OMOs are typically either expansionary or contractionary in nature.
  • In a contractionary scheme, the OMO will seek to reduce the money supply and increase interest rates in an effort to deter economic growth.
  • Therefore, the implementation of contractionary policy will result in the selling of bonds (cash in exchange for debt holding) and an expansionary policy (buy bonds in exchange for cash) will result in an increase in the money supply at a lower interest rate as a means to enhance growth opportunities and revitalize the economy.

• Interest Rate Levels

  • Monetary policies are referred to as either expansionary or contractionary.
  • Contractionary policy is intended to slow inflation in hopes of avoiding the resulting distortions and deterioration of asset values.
  • Contractionary policy increases interest rate levels by expanding the money supply more slowly than usual or even shrinking it.

• Expansionary Versus Contractionary Fiscal Policy

  • Conversely, in times of economic expansion, the government can adopt a contractionary policy, decreasing spending, which decreases aggregate demand and the real GDP, resulting in a decrease in prices.

• Monetary Policy

  • It is referred to as either being expansionary or contractionary.
  • A contractionary policy expands the money supply more slowly than usual or even shrinks it.
  • Contractionary policy is intended to slow inflation in hopes of avoiding the resulting distortions and deterioration of asset values.
  • A policy is referred to as "contractionary" if it reduces the size of the money supply, increases the money supply slowly, or if it raises the interest rate.

• Limits of Fiscal Policy

  • Policy makers are viewed to interact as strategic substitutes when one policy maker's expansionary (contractionary) policies are countered by another policy maker's contractionary (expansionary) policies.
  • If they behave as strategic complements,then an expansionary (contractionary) policy of one authority is met by expansionary (contractionary) policies of other.