As an expert macroeconomist, you have been hired by the federal government to act as a consultant and aid with a national economic situation. The economy is currently facing an inflationary gap.

these are policies mentioned:

Monetary policy influences interest rates and the number of loanable funds available, which in turn influences several components of aggregate demand. Tight or contractionary monetary policy, which raises interest rates and reduces the number of loanable funds, reduces two components of aggregate demand. Business investment will fall as firms find it less appealing to borrow money.

Furthermore, higher interest rates will discourage consumers from borrowing large-ticket items such as houses and automobiles. Conversely, monetary policy that is loose or expansionary, resulting in lower interest rates and a greater quantity of loanable funds, tends to increase business investment and consumer borrowing for large-ticket items.

In contrast, if an economy produces more than its potential GDP, a contractionary monetary policy can reduce inflationary pressures for a rising price level. The original equilibrium occurs at an output of 750, which is greater than potential GDP. The contractionary monetary policy raises interest rates while discouraging borrowing for investment and consumption.

Conversely, if an economy produces more than its potential GDP, a contractionary monetary policy can alleviate inflationary pressures for a rising price level. The original equilibrium occurs at 750, which is greater than the potential GDP. The contractionary monetary policy raises interest rates while discouraging investment and consumer borrowing.

this is the question :

c) Name and describe 2 negative economic or negative social consequences which may occur as a result of these policies. Note: You may provide 1 negative economic consequence and 1 negative social consequence if you like. (4 Marks = 2 Marks each)