A contractionary fiscal policy is shown as a:
A) rightward shift in the economy's aggregate demand curve.
B) rightward shift in the economy's aggregate supply curve.
C) movement along an existing aggregate demand curve.
D) leftward shift in the economy's aggregate demand curve.

Question

Quizplus · Accepted Answer

A contractionary fiscal policy involves reducing government spending and/or increasing taxes, which decreases disposable income and reduces consumer spending. This decrease in consumer spending leads to a decrease in aggregate demand, which is represented by a leftward shift in the economy's aggregate demand curve.

A Contractionary Fiscal Policy Is Shown as A