ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Contractionary monetary policy would increase government revenue & slow down the economy. Contractionary fiscal policy would decrease the reserve requirement & slow down the economy.

Detailed explanation-2: -To combat inflation, the government could use contractionary fiscal policy. In this case, it might raise taxes and decrease government spending in an attempt reduce the total level of spending.

Detailed explanation-3: -Expansionary fiscal policy includes tax cuts, transfer payments, rebates and increased government spending on projects such as infrastructure improvements. For example, it can increase discretionary government spending, infusing the economy with more money through government contracts.

Detailed explanation-4: -Contractionary fiscal policy is used to slow economic growth, such as when inflation is growing too rapidly. The opposite of expansionary fiscal policy, contractionary fiscal policy raises taxes to cut spending. As consumers pay more taxes, they have less money to spend, and economic stimulation and growth slow.

Detailed explanation-5: -During a recession, the government may lower tax rates or increase spending to encourage demand and spur economic activity. Conversely, to combat inflation, it may raise rates or cut spending to cool down the economy.