Fiscal restraint is
A)Tax hikes and/or spending cuts intended to reduce aggregate demand.
B)Changes in taxes and spending intended to increase aggregate supply.
C)Tax cuts or spending increases meant to reduce aggregate demand.
D)Not possible because Congress continues to spend too much money.

Question

Quizplus · Accepted Answer

Fiscal restraint refers to deliberate actions taken by a government to reduce its expenditure and/or increase its revenue, with the aim of reducing aggregate demand in the economy. This is typically done to combat inflation and reduce the budget deficit. Tax hikes and/or spending cuts are examples of such actions. Choice B is incorrect because changes in taxes and spending that increase aggregate supply are referred to as supply-side policies. Choice C is incorrect because tax cuts or spending increases are expansionary fiscal policies that would increase rather than reduce aggregate demand. Choice D is a subjective statement that cannot be proven or disproven.

Fiscal Restraint Is