Question

If the economy experiences a contractionary gap and the fed stimulates the economy then

Answer 1

The demand for money
A) d and e are correct
B) all of the following are correct
C) decreases as the average selling price of a unit of output increases
D) increases as GDP increases
E) is increased by credit card usage
2. The higher the i

Answer 2

Since there are no options given, I am giving a general answer.

In economics, a contractionary gap is when the actual output of the economy falls below its capacity. The economy is temporarily operating below its long-run potential, as measured by real GDP.

The Federal Reserve or the Fed is the bank of the U.S. government and it regulates the nation's financial institutions.

In situations when the economy experiences a contractionary gap and the Fed stimulates the economy, then the money supply decreases because the Fed makes open-market sales.

When the Fed decreases the money supply, the policy is called as contractionary. Under contractionary monetary policy, the economy shrinks and output decreases.