Which of the following fiscal tax policies would be used to reduce inflation? (1 point)

Answer 1

To reduce inflation, a government might implement contractionary fiscal policies. These typically include:

1. Reducing government spending: Decreasing expenditures on public services, infrastructure, and other government projects can help reduce overall demand in the economy.

2. Increasing taxes: Higher taxes can decrease disposable income for consumers and businesses, which can also reduce demand and help control inflation.

Both of these policies aim to cool off an overheating economy by decreasing spending, which can help alleviate inflationary pressures.