Question

The fiscal policy that involves reducing government spending, reducing transfer payments, or raising taxes to decrease aggregate demand is called ___________.
a. expansionary
b. diminishment
c. contractionary
d. reductionist

Answer 1

The correct option is C.
Fiscal policy refers to the method that the government use to adjust its spending levels and tax rates in order to monitor and influence the nation's economy. Fiscal policy are divided into three types, these are: neutral, expansionary and contractionary fiscal policy.  A contractionary fiscal policy is one which occurs when a government lowers its spending and increase the tax rate<span />