If the economy experiences a contractionary gap and RBI stimulates the – InterviewSolution

1.	If the economy experiences a contractionary gap and RBI stimulates the economy the money supply?
Answer» 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. ... Under contractionary monetary policy, the economy shrinks and output decreases.

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