Contractionary policies, such as raising interest rates or reducing government spending, are typically aimed at curbing inflation and stabilizing the economy. The option that best explains how these policies can hamper economic growth is c) consumer confidence decreases.
When contractionary measures are implemented, consumers may perceive that the economy is weakening, leading to a drop in consumer confidence. This reduced confidence often results in decreased spending and investment, which are crucial components of aggregate demand. Lower consumer spending can create a ripple effect: businesses might reduce production, leading to job cuts, further dwindling consumer confidence and spending.
In summary, while all the listed options can have an impact on the economy, the decrease in consumer confidence stands out as a critical factor that directly slows economic growth during times of contractionary policies.