Question

Briefly define contractionary fiscal policy and explain how it affects the macroeconomy

Answer 1

contractionary fiscal policy means when the government lowers their spending budget so that they can reduce the fiscal deficit. As the word contractionary tells, it is reduction in government budget.

So when the government adopts lower spending it means there will be lower GDP growth as government spending accounts for a big chunk of the the countrys GDP. so when there is decline in contractionary fiscal policy, the macroeconomy is negatively affected resulting in economic weakness.

the above is the answer