A contractionary fiscal policy will reduce a government budget deficit or increase a government budget surplus and lower the quantity of bonds the government must sell.

Question

Quizplus · Accepted Answer

A contractionary fiscal policy involves reducing government spending, increasing taxes, or a combination of both, which ultimately leads to a reduction in the government budget deficit or an increase in the government budget surplus. This, in turn, leads to a lower need for the government to sell bonds to finance its deficit, as it has more revenue or less spending to cover its expenses.

A Contractionary Fiscal Policy Will Reduce a Government Budget Deficit