Year 12s: what will be the first way you research your future options? >>

Economic - Fiscal , monetary policies

does contractionary fiscal policy mean ' raise taxes and reduce government spending ?'
what about expansionary fiscal policy ? reduce tax and increase government spending ?

Reply 1

Lulu24

Original post by MR95

does contractionary fiscal policy mean ' raise taxes and reduce government spending ?'
what about expansionary fiscal policy ? reduce tax and increase government spending ?

yes

Reply 2

gr8wizard10

In its simplest form yest.

Contractionary = Withdrawal from circular flow of income (in aims to decrease the marginal propensity to consume)
Expansionary = Injection into circular flow of income (to increase the marginal propensity to consume)