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Explain the linkages in causal chain when the central bank conducts a contractionary monetary policy. what...

Explain the linkages in causal chain when the central bank conducts a contractionary monetary policy. what will be the ultimate effect on GDP?
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Contractionary monetary policy is aimed at lowering the money supply in the economy. The central bank does that by the open market sale of government securities, or by raising the required reserves ratio or by raising the bank rate. A decrease in money supply lowers cash in hand of the public, which reduces consumption demand. A reduction in consumption will immediately lower aggregate demand and hence, output. Ultimately, the GDP will decrease.

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