Concept:Monetary authorities control inflation by reducing the amount of money in circulation.
Explanation:Inflation occurs when there is too much money chasing too few goods, causing prices to rise.
To reduce inflation, the central bank must decrease the money supply in the economy.
Restrictive (contractionary) monetary policies reduce the money supply by increasing interest rates, selling government securities, and raising the cash reserve ratio.
Higher interest rates discourage borrowing and spending, which lowers aggregate demand.
Lower aggregate demand slows down price increases, thereby controlling inflation.
Expansive monetary policies, increased government expenditure, and reduced taxes would all increase demand and worsen inflation.
Answer:D. engage in restrictive monetary policies