contractionary policies move the budget towards (surplus) (deficit); expansionaryv policies move budgets toward (surplus) (deficit). What do these terms mean?

Question

Social Studies

Fiona Olsen

11 January, 00:31

contractionary policies move the budget towards (surplus) (deficit); expansionaryv policies move budgets toward (surplus) (deficit). What do these terms mean?

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Rich · Answer 1

Answer: contractionary policies move the budget towards (deficit); expansionary policies move budgets toward (surplus)

Explanation:

Contractionary and expansionary policies are methods the government used to regulate the economy. Contractionary policies aim to reduce the money supply in circulation. They are used when the economy is experiencing inflation and such policies include decrease in government spending and increase in the interest rate.

Expansionary policies are the opposite of Contractionary policies, and aim to increase the supply of money in circulation. Tools used include reducing interest rate to discourage saving and increase borrowing.