when the government decides to increase taxes to fight an inflationary gap, it is: most likely to increase the budget deficit. likely to dampen the effects of inflation but not lead to a correction. an example of an automatic stabilizer. an example of discretionary fiscal policy.

Fiscal policy uses public spending and taxation to affect the economy, particularly macroeconomic conditions. Fiscal policy is sometimes contrasted with monetary policy, which is carried out by central bankers rather than elected government officials.

What is Fiscal policy:

By altering the rates and distributions of taxes and expenditures, governments can stimulate the economy through fiscal policy, often known as spending restrictions. Fiscal policy determines whether a government will spend more or less than it takes in. In a word, it is the process of utilizing government spending and taxation to promote sustainable growth. Fiscal policy and monetary policy—both of which are controlled by the central bank are frequently contrasted.

Monetary and fiscal policy are the two main tools available to policymakers when they seek to affect the economy. Governments, on the other hand, can alter fiscal policy by changing the types and levels of taxation, expenditures, and borrowing.

The goals of a fiscal strategy might range from funding the construction of public assets like roads, trains, and other infrastructure projects to promoting education, public health and safety, and paying salaries, subsidies, and pensions.

Learn more about Fiscal policy:

https://brainly.com/question/6583917

#SPJ4