Question

How can expansionary and contractionary tax policies be used to manage the economy? Be sure to answer in two to three sentences.

Answer 1

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. On the other hand, contractionary policies generally raise taxes, which can give consumers and producers less to spend. This can cause less economic growth.