Why is contractionary fiscal policy often not used by the federal government?(1 point)

Question

Responses

Individual and corporate tax rates increase while spending for social programs decreases, both of which would lead the economy to slow down or contract.
Individual and corporate tax rates increase while spending for social programs decreases, both of which would lead the economy to slow down or contract.

Decreases in federal government revenue and increasing expenses cause large deficits and adds to the national debt, which put a strain on the economy.
Decreases in federal government revenue and increasing expenses cause large deficits and adds to the national debt, which put a strain on the economy.

The increased individual and corporate income taxes overheats the economy and increases inflation.
The increased individual and corporate income taxes overheats the economy and increases inflation.

The increase in individual and corporate tax rates as well as government spending cause a slow down in the private sector economy.

Answer 1

The most accurate reason why contractionary fiscal policy is often not used by the federal government would be:

Individual and corporate tax rates increase while spending for social programs decreases, both of which would lead the economy to slow down or contract.

This response highlights the negative impact of contractionary measures on economic growth, which is a key reason why governments may hesitate to implement such policies, especially during periods of economic uncertainty or recession. Contractionary fiscal policy can lead to reduced consumer spending and lower overall economic activity, which policymakers typically want to avoid.