Respuesta :
Answer: decrease in government purchases and an increase in tax.
Explanation:
Fiscal policy is the use of government expenditure and taxation to control economic activities. Contractionary fiscal policy is a type of fiscal policy that has to do with the increase in taxes and decrease in government expenditures Contractionary fiscal policy is used when there is too much money in circulation or to fight inflationary pressures.
Because of the increase in taxes, households and firms will have less money to spend. Lower disposal income will help in reducing consumption.
Also, government reduction of expenditure is also a good Contractionary fiscal policy method. Decrease in spending by the government will reduce money supply in the economy and consumption will be reduced too.
