what is the effect of contractionary fiscal policy in the short run? a it will increase foreign debt. b it…
what is the effect of contractionary fiscal policy in the short run? a it will increase foreign debt. b it will increase the saving rate. c it will decrease the saving rate. d it will decrease the output level. e it will increase the output level.
Answer
Brief Explanations:
Contractionary fiscal policy involves reducing government spending or increasing taxes. In the short - run, it reduces aggregate demand. Lower aggregate demand leads to a decrease in the output level as businesses produce less in response to lower demand.
Answer:
B. It will decrease the output level.