In a contractionary monetary policy, the central bank aims to decrease the money supply and raise interest rates to combat an inflationary gap. The primary goal of this policy is to _____ the price level in the economy.

In a contractionary monetary policy, the central bank wants to reduce the amount of money circulating in the economy. This is done to help lower the price level, which means making sure that prices for goods and services do not rise too quickly. When the central bank raises interest rates, borrowing becomes more expensive, so people and businesses are less likely to take loans and spend money. For example, if a bank raises interest rates, someone might decide not to take a loan to buy a new car because it will cost more in interest. By reducing spending, the central bank hopes to slow down inflation and stabilize prices.