Under a contractionary policy the government can reduce the deficit by

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Jacoby Fisher

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16 February, 18:40

Under a contractionary policy the government can reduce the deficit by

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Selina Shelton · Answer 1

Under a contractionary policy the government can reduce the deficit by decreasing the amount of public spending.

A contractionary policy is used in order to address distortions in the economy such as inflation or public deficit. Public deficit takes place when the amount of public spending exceeds the income that the state has received during a certain time period. When the spending is reduced, the goverment aims to bring the balance back, after a former period of fiscal expansion.