When there is an increase in taxes and the decreasing government spending during an economic expansion the purpose is to to slow down aggregate demand and reduce inflation
What is meant by contractionary government policy?
This is the tool that the government may use when they want to stimulate the economy. The government may decide to raise taxes, this would have an adverse effect on consumption in a given economy.
Another way they may do this would be through the decrease in the way that the government spends money in the economy.
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