A fiscal policy contraction would lead to:
A)no reaction on the IS curve.
B)a movement along the IS curve.
C)a right shift in the IS curve.
D)a left shift in the IS curve.

Question

Quizplus · Accepted Answer

A fiscal policy contraction involves government reducing its spending, increasing taxes or both. This would result in a decrease in aggregate demand in the economy, leading to a decrease in output and a left shift in the IS curve.

A Fiscal Policy Contraction Would Lead To