Question

Which of these describes a contractionary fiscal policy position?
A. the govt. maintains spending and taxes at their current rate.
B. the govt. spends less money than it earns by cutting it's spending or by raising taxes.
C. the govt. spends more money than it earns from tax revenue.

Answer 1

The correct answer for the question that is being presented above is this one: "B. the govt. spends less money than it earns by cutting it's spending or by raising taxes." A contractionary fiscal policy is when the government decreases expenditure and / or increases taxes in order to decrease a budget deficit or increase a budget.

Answer 2

The correct answer is this: THE GOVERNMENT SPEND LESS MONEY THAN IT EARNS BY CUTTING IT'S SPENDING OR BY RAISING TAXES.
The contractionary fiscal policy is an economic technique used by the government and the central bank of a nation to slow down the economy and to combat inflation. It is characterized by reduced government spending, increase in taxes and taking steps to reduce the amount of money in circulation.