Question

f the Federal Reserve conducts tight monetary policy to contract the money supply, it is most likely to change investment spending, aggregate demand, and net exports (based on changing value of the dollar) in the following ways:

Answer 1

investment spending decreases

aggregate demand decreaes

net exports decreaes

Step-by-step explanation:

When contractionary monetary policy is carried out, money supply reduces and aggreagrate demand falls.

Aggregate demand = consumption + investment spending + government spending + Net Export.

Nominal interest rate will increases and investment spending would decreaes.

Due a reduction in money supply, consumer spending and aggreagrate demand and import would fall.

I hope my answer helps you.