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25 October, 14:36

When does the government assume a contractionary fiscal policy position?

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  1. 25 October, 14:38
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    The government assume a contractionary fiscal policy when the economy is strong. When the economy is strong, prices increases as a result of fierce competition for resources. In this situation, the government will assume a contractionary fiscal policy by reducing its spending and by increasing tax. This position will normally create a surplus for the government: a surplus is the amount of taxes left over after government spending.
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