A Contractionary Fiscal Policy Is One That Reduces Aggregate Demand

question 96

Multiple Choice

A contractionary fiscal policy is one that reduces aggregate demand by decreasing:

• A) government purchases.
• B) the money supply.
• C) interest rates.
• D) taxes.

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Definitions:

Normal Balance

The side of an account (debit or credit) where increases in the account are recorded.

Financial Statement(s)

Documents that provide an overview of a business's financial condition, including balance sheet, income statement, and cash flow statement.

Permanent/Temporary

Categories of accounts in accounting, where permanent accounts have balances that are carried over into future periods, while temporary accounts are closed at the end of each accounting period.

Normal Balance

The side (debit or credit) of an account that is usually increased, indicative of the account type's nature in the accounting equation.