Economics Fiscal Policy Questions
Contractionary fiscal policy refers to the measures taken by the government to decrease aggregate demand and slow down economic growth. This is typically done during periods of inflation or when the economy is overheating. The main objective of contractionary fiscal policy is to reduce government spending and/or increase taxes in order to decrease the amount of money available for consumption and investment. By doing so, it aims to decrease the overall level of economic activity and control inflationary pressures.