Contractionary Fiscal Policy
Answer the following questions in your response:
What is a contractionary fiscal policy?
When would an economy ever pursue a contractionary fiscal policy?
Can you find any examples for when this policy was used in our economy and why?
Use outside references to support your points.
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Solution Preview
Contractionary fiscal policy is one of several stabilization policies available to the federal government to address business-cycle problems. A contractionary fiscal policy is one in which there is a decrease in government spending, but tax increases and/or a decrease in transfer payments are used to correct the inflationary problems of a business-cycle expansion (Amadeo, 2013). This type of policy would be utilized when the country is facing inflation because ...
Solution Summary
This solution is about a half page and briefly describes what Contractionary Fiscal Policy is, why an economy would pursue such a policy, and lists contemporary examples of when this policy was used in our economy. The solution includes references in APA format.