Which of the following sequence of events follows a contractionary monetary policy?   money demand rises---interest rates fall---consumption & investment fall and real GDP falls 2. money demand falls---interest rates rise---consumption & investment fall-----real GDP falls 3. money demand falls---interest rates fall---consumption & investment fall----real GDP falls 4. money demand falls---interest rates rise---consumption & investment falls---real GDP rises

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A: Crowding out means,when the interest rate becomes zero and then it cannot be lowered any furher.

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Q: how do i answer 2.1

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Q: Why does contractionary monetary policy cause interest rates to rise?

A: Contractionary monetary policy was used to decrease the money supply in an economy.

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