A contractionary fiscal policy is one that reduces aggregate demand by decreasing:
A) government purchases.
B) the money supply.
C) interest rates.
D) taxes.

Question

Quizplus · Accepted Answer

A contractionary fiscal policy reduces aggregate demand by decreasing government purchases or increasing taxes, not by affecting the money supply or interest rates, which are monetary policy tools.

A Contractionary Fiscal Policy Is One That Reduces Aggregate Demand