A contractionary fiscal policy is intended primarily to
Correct answer: A. Reduce aggregate demandary pressure
- A. Reduce aggregate demandary pressure
- B. Increase public borrowing permanently
- C. Raise aggregate demand during recession
- D. Increase exports through currency sales
Explanation
Contractionary fiscal policy reduces aggregate demand, commonly through lower government spending or higher taxes, to limit excessive inflationary pressure. Raising demand during a recession is an expansionary objective.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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