Question

Which are contractionary fiscal policies? 
A. Increased taxation and increased government spending


B. Increased taxation and decreased government spending

C. Decreased taxation and no change in government spending

D. No change in taxation and increased government spending

Answer 1

Answer: Increased taxation and increased government spending

Step-by-step explanation: Fiscal policy refers to the utilization of govt. spending and revenue for operating a country's economy.

A contractionary fiscal policy refers to that fiscal policy which is implemented to fight with inflationary pressures. In case of inflation, govt. aims to decrease the supply of money which can be done by increasing taxes or decreasing govt. spending.

Thus, option B is correct.