Question

How can expansionary and contractionary tax policies be used to manage the economy?

Answer 1

in most cases although when both are implemented in a complimentary manner, goals can be achieved more efficiently and smoothly

Answer 2

Expansionary and contractionary policies can be used to encourage or discourage economic growth. Expansionary policies generally lower taxes and give consumers and producers additional money, which encourages spending and growth. This is done when unemployment is high. On the other hand, contractionary policies generally raise taxes, which can give consumers and producers less to spend. This can cause less economic growth, but is necessary when the economy is growing too quickly and inflation is rising.