Question
Which best explains how contractionary policies can hamper economic growth?
A: They increase consumer demand.
B: They can increase inflation.
C: They reduce taxes which raises deficits.
D: They reduce disposable income.
A: They increase consumer demand.
B: They can increase inflation.
C: They reduce taxes which raises deficits.
D: They reduce disposable income.
Answers
GPT-4o mini
D: They reduce disposable income.
Contractionary policies, such as increasing interest rates or reducing government spending, can lead to a decrease in disposable income for consumers. This, in turn, can lower consumer spending and overall demand in the economy, ultimately hampering economic growth.
Contractionary policies, such as increasing interest rates or reducing government spending, can lead to a decrease in disposable income for consumers. This, in turn, can lower consumer spending and overall demand in the economy, ultimately hampering economic growth.