Question

Suppose the government purposely changes the economy's cyclically adjusted budget from a deficit of 0 percent of real GDP to a deficit of 3 percent of real GDP.The government is engagingin a(n)

A. expansionary fiscal policy.
B. contractionary fiscal policy.
C. neutral fiscal policy.
D. low-interest-rate policy.

Answer 1

Answer:

(b) Contractionary fiscal policy.

Explanation:

Correct word for the given statement is  contractionary fiscal policy.

Contractionary fiscal policy is a type of monetary approach that includes expanding charges, diminishing government uses or both so as to battle inflationary weights.  

Because of an expansion in charges, family units have less transfer salary to spend. Lower transfer pay diminishes utilization.