Question

If the government wants to reduce GDP by $500 million, the most appropriate action is:

contractionary fiscal policy, which includes a reduction in government spending by $500 million.
contractionary fiscal policy, which includes a reduction in government spending by more than $500 million.
contractionary fiscal policy, which includes a reduction in government spending by less than $500 million.
expansionary fiscal policy, which includes an increase in government spending by $500 million.
expansionary fiscal policy, which includes an increase in government spending by more than $500 million.
expansionary fiscal policy, which includes an increase in government spending by less than $500 million.

Answer 1

The correct answer is the first option: contractionary fiscal policy, which includes a reduction in government spending by $500 million.

Step-by-step explanation:

On one hand, Gross Domestic Product, or GDP, is the name given in the field of economics, to the term that refers to a monetary measure of the market value of all the goods and services that are produced in the economy of a country in an specific time period of evaluation.

On the other hand, a contractionary fiscal policy indicates the fact of reducing the amount of money spent in the economy, therefore that the main focus of this type of policy is to try to lower the public expenditure basically.

Therefore that it is understandable that the correct answer is the first option where the action would be of reducing the government spending by $500 million, according to what the question ask.