Explain what effect a contractionary fiscal policy have on the price level and real GDP, starting from full employment equilibrium?
Fiscal policy is the policy which deals in spending of government, taxes and public debt. As per amosweb, CONTRACTIONARY FISCAL POLICY "is a form of fiscal policy in which a decrease in government purchases, an increase in taxes, and/or a decrease in transfer payments are used to correct the inflationary problems of a business-cycle expansion. The goal of contractionary fiscal policy is to close an ...
This solution of 314 words discusses the effects of contractionary fiscal policy. References used are included.