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5 July, 02:50

What is the effect of contractionary fiscal policy on the money supply?

A) it depends

B) doesn't affect it

C) decreases it

D) increases it

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Answers (1)
  1. 5 July, 04:40
    0
    C. Decreases money supply

    Explanation:

    The contractionary fiscal policy happens when the central bank of a particular nation raises its interest rates to prevent inflation. This will result to a decrease in money supply in the economy. The government expenditures are cut-down and there will be increased taxes causing the budget surplus of the government to increase.
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