The government can use contractionary fiscal policies to prevent a wage- price spiral.

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Contractionary fiscal policies involve decreasing government spending, increasing taxes, or a combination of both. This can help reduce aggregate demand and prevent inflation, which can be caused by a wage-price spiral. In a wage-price spiral, workers demand higher wages due to rising prices, which in turn leads to higher production costs for businesses, leading to further price increases. By reducing aggregate demand, the government can help prevent this cycle from continuing.

The Government Can Use Contractionary Fiscal Policies to Prevent a Wage-