A contractionary fiscal policy would cause the:
A)aggregate demand curve to the right.
B)aggregate demand curve to the left.
C)short-run aggregate supply curve to the right.
D)short-run aggregate supply curve to the left.

Question

Quizplus · Accepted Answer

A contractionary fiscal policy is designed to reduce aggregate demand, which means that there will be less spending and demand for goods and services. This will cause the aggregate demand curve to shift to the left. It will also lead to a reduction in inflationary pressures but could result in a decrease in output and employment levels in the short run. Thus, the correct choice is B.

A Contractionary Fiscal Policy Would Cause The