Question

Contractionary policies are _____.


fiscal policies used to increase aggregate demand, thereby increasing the growth of economic output


bills that set money aside for specific spending


fiscal policies, like lower spending and higher taxes, that reduce economic growth


fiscal policies, like higher spending and tax cuts, that encourage economic growth

Answer 1

Contractionary policies are **fiscal policies, like lower spending and higher taxes, that reduce economic growth**.

These policies are typically used to combat inflation by decreasing the overall demand in the economy.