Contractionary fiscal policy includes:
A) increasing government purchases.
B) increasing government transfers.
C) raising tax rates.
D) decreasing money growth.

Question

Quizplus · Accepted Answer

Contractionary fiscal policy is used to decrease inflation and slow down economic growth. Raising tax rates is a way for the government to reduce the amount of money in the economy, as people and businesses have less disposable income to spend or invest. Increasing government purchases and transfers would be expansionary fiscal policy, which would increase the amount of money in the economy and stimulate economic growth. Decreasing money growth is a monetary policy action, not a fiscal policy action.

Contractionary Fiscal Policy Includes