Asked by Abigail Small on Apr 27, 2024
Verified
Contractionary fiscal policy could be carried out by
A) an increase in government spending and/or a decrease in taxes.
B) an increase in transfer payments.
C) a decrease in government spending and/or an increase in taxes.
D) All of the choices are correct.
Contractionary Fiscal Policy
To fight inflation, the federal government raises taxes and/or cuts spending.
Government Spending
Expenditures by the government sector on goods and services, including infrastructure, public sector employees' wages, and social services.
Taxes
Mandatory monetary contributions or different forms of levies applied to taxpayers by government entities for the purpose of financing governmental operations and a range of public expenses.
- Recognize the importance of modifications in government spending and taxation on economic operations.
Verified Answer
NV
Natasha VillacrucisMay 02, 2024
Final Answer :
C
Explanation :
Contractionary fiscal policy aims to decrease aggregate demand and slow down economic growth. Therefore, the best option for such a policy would be to decrease government spending and/or increase taxes. Option A and B would be expansionary fiscal policies, as they increase aggregate demand and stimulate economic growth. Option D is incorrect because option A is expansionary fiscal policy.
Learning Objectives
- Recognize the importance of modifications in government spending and taxation on economic operations.