A contractionary fiscal policy is likely to ______ a government budget deficit and _______ borrowing by the Treasury.

Question

Quizplus · Accepted Answer

A contractionary fiscal policy involves decreasing government spending and/or increasing taxes in order to reduce inflation and slow down economic growth. This reduction in government spending will lead to a decrease in the government budget deficit. Additionally, since the government is borrowing less money due to the decrease in spending, borrowing by the Treasury will also decrease.

A Contractionary Fiscal Policy Is Likely to ______ a Government