Contractionary fiscal policy to prevent real GDP from rising above potential real GDP would cause the inflation rate to be ________ and real GDP to be ________.
A)higher; higher
B)higher; lower
C)lower; higher
D)lower; lower

Question

Quizplus · Accepted Answer

Contractionary fiscal policy aims to reduce inflation by decreasing aggregate demand, which typically results in a lower inflation rate and a decrease in real GDP.

Contractionary Fiscal Policy to Prevent Real GDP from Rising Above