A trade off for contractionary fiscal policy may be

Question

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Contractionary fiscal policy, such as reducing government spending or increasing taxes, is typically implemented to combat inflation or reduce a budget deficit. However, a trade-off of this policy is often increased unemployment as businesses may cut back on hiring or even lay off workers in response to the decrease in demand resulting from the policy. Therefore, choice C (unemployment) is the best option. Pressure on prices and inflation are potential consequences of expansionary fiscal policy, which involves increasing government spending or cutting taxes to stimulate the economy. Increases in output could be a potential benefit of this policy, but it is not a trade-off associated with contractionary fiscal policy.

A Trade Off for Contractionary Fiscal Policy May Be