A contractionary fiscal policy is one that reduces aggregate demand by decreasing: government spending.
Contractionary economic coverage does the reverse: it decreases the level of aggregate call for by way of decreasing consumption, decreasing investment, and decreasing government spending, both through cuts in government spending or will increase in taxes.
Contractionary fiscal policy is whilst the government both cuts spending or increases taxes. It receives its call from the manner it contracts the financial system. It reduces the quantity of cash available for companies and customers to spend.
Contractionary economic coverage decreases the level of aggregate demand, either thru cuts in authority spending or will increase in taxes. Contractionary monetary policy is most suitable when a financial system is generating above its potential GDP.
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