When the economy is overheating and policymakers pursue contractionary fiscal policy, they express a willingness to trade off _____ output for a _____ price level.

Question

Quizplus · Accepted Answer

Contractionary fiscal policy, aimed at cooling an overheating economy, typically involves reducing government spending or increasing taxes. This slows economic growth, leading to lower output. The goal is to reduce inflationary pressures, thus aiming for a lower price level.

When the Economy Is Overheating and Policymakers Pursue Contractionary Fiscal