In an aggregate demand and aggregate supply graph, a contractionary fiscal policy can be illustrated by a:
A)leftward shift in the aggregate demand curve.
B)rightward shift in the aggregate demand curve.
C)rightward shift in the aggregate supply curve.
D)movement along an existing aggregate supply curve.

Question

Quizplus · Accepted Answer

A contractionary fiscal policy involves decreasing government spending or increasing taxes, which results in lower aggregate demand. This can be illustrated by a leftward shift in the aggregate demand curve.

In an Aggregate Demand and Aggregate Supply Graph, a Contractionary