Final answer:
The statement is false; a restrictive or contractionary monetary policy actually shifts the economy's aggregate demand curve to the left, not the right, by discouraging investment and consumption due to higher interest rates.
Step-by-step explanation:
The statement that restrictive monetary policy reduces investment spending and shifts the economy's aggregate demand curve to the right is false. On the contrary, restrictive monetary policy, which is also known as contractionary monetary policy, is employed by a central bank to decrease the supply of money and credit in the economy. This action typically raises the interest rate, thus discouraging borrowing for investment and consumption, and in effect, shifting the aggregate demand curve to the left. Such a policy leads to a lower price level and, at least in the short run, to lower real GDP.
When implementing contractionary monetary policy, the Federal Reserve may target federal funds rates using open market operations. A higher interest rate makes borrowing less attractive for businesses, thereby reducing their investments in physical capital, and discouraging consumers from obtaining loans for large purchases such as houses and cars. The overall effect is to reduce economic activity to counter inflation by decreasing aggregate demand.