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what is the impact of a contractionary fiscal policy on impact in the short run? show...

what is the impact of a contractionary fiscal policy on impact in the short run? show the effect using an IS-LM curve.

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Contractionary fiscal policy is adopted by the government to control the inflationary gap. In contractionary fiscal policy, government increases the tax and decreases the government spending . With that IS curve decline and shift backwards. Due to backward shift in IS curve equilibrium rate of interest and output fluctuate. Due to decrease, equilibrium output decreases and reach to QI and equilibrium rate of interest falls and shift to I1.

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