Which kind of monetary policy would you expect in response to high inflation: a. Expansionary
b. Contractionary

B. Contractionary Monetary Policy

Explanation:

According to Investopedia, inflation is a quantitative measure of the rate at which average price level of selected goods and services in an economy increases over a period of time which causes the purchasing power of the currency to fall.

One popular method of controlling high inflation is the Contractionary Monetary Policy. The aim of the contractionary monetary policy is to cut the supply of money within an economy by decreasing bond prices and increasing interest rates through the central bank.

When the Central Bank increases their interests rates, banks become forced to increase their rates as well which discourages consumers from borrowing and makes saving more attractive.

These help to cut down spending, causes prices of goods and services to drop and consequently causes inflation to slow down.

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