Contractionary policy (紧缩性政策)

Contractionary policy (紧缩性政策 jǐn suō xìng zhèng cè) is is a type of macroeconomic tool used to fight inflation and slow down the economy when the economy is overheated. For instance, the central bank may increase interest rates to reduce the money supply and make borrowing more expensive. If the policy is effective, it will weaken the aggregate demand since the consumer spending and investment decreases, and bring the economy to a healthy level. Also see: expansionary policy, accommodating policy.

Part 1: Breakdown of Words

• “Contractionary” (紧缩 jǐn suō) as in “contractionary monetary policy” (紧缩性货币政策 jǐn suō xìng huò bì zhèng cè). The term “contractionary” refers to relating to or constituting the contraction of a country’s economy.
  • “紧” (jǐn) as in “tension/nervous” (紧张 jǐn zhāng), “emergent” (紧急 jǐn jí), or “close” (紧密 jǐn mì).
  • “缩” (suō) as in “shrink” (缩水 suō shuǐ), “zoom out/reduce/narrow” (缩小 suō xiǎo), or “abbreviate” (缩写 suō xiě).
• “Policy” (政策 zhèng cè) as in “monetary policy” (货币政策 huò bì zhèng cè), or “fiscal policy” (财政政策 cái zhèng zhèng cè).
  • “政” (zhèng) as in “politics” (政治 zhèng zhì), “government” (政府 zhèng fǔ), or “tyranny” (暴政 bào zhèng).
  • “策” (cè) as in “tactics” (策略 cè luè), “plot/scheme/plan” (策划 cè huà), or “instigate rebellion within the enemy” (策反 cè fǎn).

Part 2: Examples

1. Contractionary monetary policy (紧缩性货币政策 jǐn suō xìng huò bì zhèng cè).
2. Contractionary fiscal policy (紧缩性财政政策 jǐn suō xìng cái zhèng zhèng cè).