Answer :
A central bank will execute a money supply in the economy if it determines that it needs to reduce both aggregate demand and the currency value.
What is demand?
The term “demand” is relying on people needs and wants to the amount of goods and services. Demand is an economic notion that deals with the connection between consumer demand for goods and services and their market prices.
Constrained monetary policy is used by the banking system both aggregate demand and the currency value to decrease the supply of cash and credit in the business, raising interest rates, discouraging borrowing for investments and consumption, and shifting aggregate demand to the left.
As a result, the based as the central bank decides that it needs to reduce both aggregate demand and the money supply, it will implement a tight monetary policy.
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