Contractionary fiscal policy will most likely

Question

Quizplus · Accepted Answer

Contractionary fiscal policy is used to control inflation by decreasing government spending or increasing taxes, which leads to a decrease in aggregate demand. This will result in a decrease in the price level, which is the opposite of what would happen with inflation. It is unlikely to raise real GDP, as the decrease in aggregate demand could potentially lead to a recession. It may also lower inflation by decreasing aggregate demand.

Contractionary Fiscal Policy Will Most Likely