contractionary policy

Popular Terms
A variation of federal fiscal policy with the goal of slowing down a rapidly expanding economy. The objective is to curb inflation by restricting the money supply. By tightening the money supply, spending is discouraged. The policy can be enacted by: 1) increasing interest rates, 2) raising bank reserve requirements or 3) taking money out of circulation (raising bond rate to encourage long-term borrowing).

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The contractionary policy was in place and that was good because it would help if things did not go as planned.
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You need to make sure that you follow any contractionary policy so that you are doing everything you are obligated to.
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Over time the contractionary policy hoped to control the increasingly high inflation growth rate without causing a large amount of unemployment in the economy.
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