Contractionary fiscal policy gets its name from the fact that it C. works to lower aggregate demand and bring about price stability.
Constraints on government spending are When a government cuts spending or raises taxes, the AD curve shifts to the left, lowering prices.
To implement a contractionary approach, a central bank's rate of monetary expansion must be lowered or government spending, particularly deficit spending, must be curtailed. It is a particular type of macroeconomic tool used to combat rising inflation or other economic distortions brought on by central banks or government acts. The Federal Reserve Rate increase, the increase in bank reserve requirements, and the sale of public debt are the government's main contractionary actions. Contractionary policy is the exact opposite of expansionary policy.
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