Suppose that the Chair of the Federal Reserve, Jerome Powell is worried about inflationary pressures in the economy and has decided to adopt a contractionary monetary policy in order to limit inflation.

(a) Is Open Market Sale or Open Market Purchase the correct monetary policy that would be consistent with the adoption of a contractionary monetary policy.

(b) Graphically illustrate using the money market the effect of the Federal Reserve adopting a contractionary monetary policy. Be sure to correctly label your curves and axes. Label the initial equilibrium as Point A and the new equilibrium as Point B.