Which of the following is an indicator of a contractionary fiscal policy?

Question

Quizplus · Accepted Answer

A contractionary fiscal policy is characterized by a decrease in government spending and/or an increase in taxes in order to decrease aggregate demand in the economy. Therefore, reduced government expenditures (choice B) is an indicator of a contractionary fiscal policy. Conversely, increased government spending and/or tax cuts are indicators of an expansionary fiscal policy. Reduced money supply (choice A) is an indicator of a contractionary monetary policy, not fiscal policy. Reduction in taxes (choice C) is an indicator of an expansionary fiscal policy. Trade restrictions (choice D) are not necessarily indicative of either an expansionary or contractionary fiscal policy, as they may be implemented for a variety of reasons unrelated to fiscal policy.

Which of the Following Is an Indicator of a Contractionary