In the preceding scenario, is the discretionary fiscal policy needed to bring the economy closer to potential output an example of expansionary fiscal policy or contractionary fiscal policy?

A contractionary fiscal policy is a policy stance undertaken by the government of a country to reduce the money supply in that economy. This can be acheived either by reducing taxes or reducing government spending.

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Suppose the economy had been producing at potential output but is now producing above it. Which of the following are discretionary fiscal policies that could bring the economy closer to potential output? Check all that apply. ? A tax increase A rise in spending to prevent coastal erosion A reduction in spending on new road construction

A tax cut In the preceding scenario, is the discretionary fiscal policy needed to bring the economy closer to potential output an example of expansionary fiscal policy or contractionary fiscal policy? O Expansionary Contractionary

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