Why is contractionary fiscal policy often not used by the federal government?(1 point)
Responses
The increase in individual and corporate tax rates as well as government spending cause a slow down in the private sector economy.
The increase in individual and corporate tax rates as well as government spending cause a slow down in the private sector economy.
The increased individual and corporate income taxes overheats the economy and increases inflation.
The increased individual and corporate income taxes overheats the economy and increases inflation.
Decreases in federal government revenue and increasing expenses cause large deficits and adds to the national debt, which put a strain on the economy.
Decreases in federal government revenue and increasing expenses cause large deficits and adds to the national debt, which put a strain on the economy.
Individual and corporate tax rates increase while spending for social programs decreases, both of which would lead the economy to slow down or contract.
whats the right answer
The correct answer is: Decreases in federal government revenue and increasing expenses cause large deficits and add to the national debt, which put a strain on the economy.
The correct answer is: Decreases in federal government revenue and increasing expenses cause large deficits and adds to the national debt, which put a strain on the economy.
The right answer is:
Decreases in federal government revenue and increasing expenses cause large deficits and adds to the national debt, which put a strain on the economy.
Contrationary fiscal policy involves reducing government spending and increasing taxes in order to slow down economic growth and reduce inflation. However, it is often not used by the federal government because it can have negative effects on the economy. When the government decreases its spending and increases taxes, it can lead to a decrease in consumer spending, as individuals have less disposable income. This decrease in consumer spending can impact businesses, leading to a slowdown in the private sector economy.
Additionally, increasing taxes, such as individual and corporate income taxes, can overheat the economy and lead to inflation. This occurs because higher taxes can increase the cost of production for businesses and reduce their profitability. These increased costs are often passed on to consumers through higher prices, leading to inflationary pressures.
Lastly, contractionary fiscal policy can also result in decreases in federal government revenue and increases in expenses, which can lead to large deficits and add to the national debt. This can put a strain on the economy as the government has to allocate more resources towards servicing the debt, which limits its ability to invest in other areas such as infrastructure or social programs.
Overall, the use of contractionary fiscal policy involves trade-offs and potential negative consequences, which is why it is often not utilized by the federal government.