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in the 1990s germany attempted supply to control inflation through a restrictive monetary policy and high...

in the 1990s germany attempted supply to control inflation through a restrictive monetary policy and high interest rates . Explain how this might have influenced income and prices in the United states

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A restrictive monetary policy in Germany increased German interest rates, which lowered investment and aggregate demand in Germany. A fall in aggregate demand in Germany decreased real GDP in Germany which decreased its import demand, which in turn decreased US export demand. A decrease in export demand in US will decrease US net exports, thus lowering US aggregate demand. In the US, aggregate demand curve would shift to left, thus decreasing both price level and income (real GDP) in US.

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