Contractionary Fiscal Policy:

Ace your homework & exams now with Quizwiz!

What happens when taxes increase?

Households have less disposal income to spend. Lower disposal income decreases consumption. An increase in taxes also reduces profits available to businesses and they cut down their investment expenditures. Consumption and private investment are part of GDP, so GDP falls as a result. However, this fall is magnified by the multiplier effect

What is contractionary fiscal policy?

Increasing taxes Decreasing Government spending

When to use it?

When inflation is high


Related study sets

Carman Essentials of Pediatric Nursing 3rd Ed - Ch. 8 Atraumatic Care of Children and Families

View Set

Artificial Intelligence Chapter 12

View Set

Cells and their Organelles - Eukaryotic Cells

View Set

Tofugu JLPT N5 Vocabulary Sentences

View Set

Medium/Heavy Duty Truck Engines, Fuel, & Computerized Management Systems Chpt 6 (5th edition-Sean Bennett)

View Set