Which of the following fiscal tax policies would be used to reduce inflation?

A) income tax policy
B) contractionary policy
C) monetary policy
D) expansionary policy

1 answer

To reduce inflation, the most appropriate choice among the provided options is:

B) contractionary policy

Contractionary fiscal policy typically involves reducing government spending and/or increasing taxes, which can help decrease overall demand in the economy and thus reduce inflationary pressures. While monetary policy (option C) is primarily used to control inflation through interest rates, it is not classified as a fiscal tax policy.