The economic inflation rate is steadily growing. The government thinks it is because of excess money in the economy. It decides to implement a contractionary fiscal policy to control inflation. What action might the government take as part of its contractionary fiscal policy?

increase government spending

decrease the tax rate

increase the tax rate

stop minting money

I believe the correct answer from the choices listed above is the first option. The action that might the government take as part of its contractionary fiscal policy would be an increase government spending. Hope this answers the question. Have a nice day.

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superman1987 superman1987 · Answer 2 · 2018-09-02T15:57:15-04:00

The answer is:

increase government spending

The explanation:

-Expansionary fiscal policy can be used by governments to stimulate the economy during a recession. For example, an increase in government spending directly increases demand for goods and services, which can help increase output and employment.

-Government spending or expenditure includes all government consumption, investment, and transfer payments. In national income accounting the acquisition by governments of goods and services for current use, to directly satisfy the individual or collective needs of the community, is classed as government final consumption expenditure. Government acquisition of goods and services intended to create future benefits, such as infrastructure investment or research spending, is classed as government investment (government gross capital formation). These two types of government spending, on final consumption and on a gross capital formation, together constitute one of the major components of a gross domestic product.