The anticipated effect of contractionary monetary policy is

a. increase in aggregate demand.

b. fall in interest rates.

c. increased capital outflow

d. appreciation of the currency. 

Answer 

Option- D

Contractionary fiscal policy aims at reducing the excess demand by increasing the interest rates to discourage the loans. Higher interest rates leads to the appriciation of currency because foreign investors can get higher returns on their investments and thus allows the foreign direct investments which in turn appreciates the currency.