To control inflation, the central bank of a country may adopt
A. an expansionary monetary policy B. a restrictive monetary policy C. an increased wage policy D. a deficit financing policy
Correct Answer: B
Explanation
The purpose of restrictive monetary policy is to ward off inflation. It's called restrictive because the banks restrict liquidity. It reduces the amount of money and credit that banks can lend. It lowers the money supply by making loans, credit cards and mortgages more expensive.
