The set of fiscal policies that would be most contractionary would be a(n)


Image for 39. The set of fiscal policies that would be most contractionary would be a(n) Increase in government spending

Answer

39. Option D, Decrease in government spending and increase in taxes would be the most contractionary fiscal policy. I would like to give the reason without much complication. By adopting the above said strategies, free money supply in the nation goes down which in turn reduces the scope of investments. And hence, it would lead to the contraction of the GDP.

40. Option C is the correct answer. By way of expansionary fiscal policy, government tends to boost the investor by reducing taxes, increasing government spending or other methods.

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