If the government wants to reduce GDP by $500 million, the most appropriate action is: a) expansionary fiscal policy, which includes an increase in government spending by $500 million. b) contractionary fiscal policy, which includes a reduction in government spending by $500 million. c) contractionary fiscal policy, which includes a reduction in government spending by less than $500 million. d) contractionary fiscal policy, which includes a reduction in government spending by more than $500 million. e) expansionary fiscal policy, which includes an increase in government spending by more than $500 million. f) expansionary fiscal policy, which includes an increase in government spending by less than $500 million.

If the government wants to reduce GDP by $500 million, the most appropriate action is contractionary fiscal policy, which includes a reduction in government spending by less than $500 million.

Explanation:

Contractionary fiscal policy is a type of monetary policy that requires tax rises, government spending cuts, or both to counter inflationary pressures. Thanks to higher taxes, households have fewer funds to spend on disposal. Higher waste income reduces consumption.

Examples include raising taxation and rising public spending. The government is known as contractionary monetary policy, by using economic policies to increase the amount of resources allocated to the public.

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