Economics Q200
200Monetary policy is most likely to be contractionary for:
| GDP growth rate | Inflation Target | Policy Rate | |
| A. | 3% | 2% | 6% |
| B. | 1% | 4% | 5% |
| C | 2% | 3% | 4% |
- Option : A
- Explanation : Monetary policy is contractionary when the policy rate is above the neutral rate. Hence, when policy rate is 6% and neutral rate is 5% (3% + 2%), the policy is contractionary.
