Question

How can expansionary and contractionary tax policies be used to manage the economy?

Answer 1

inflation in the economy to avoid growing the economy too quickly. decreases demand and can lower inflation by doing expansionary policy responds to high unemployment, lowering taxes, and therefore increases spending.

Answer 2

Contractionary policy responds to high inflation in the economy to avoid growing the economy too quickly. This policy decreases demand and can lower inflation by doing so. On the contrary, expansionary policy responds to high unemployment, lowering taxes, and therefore increases spending. These tactics can help manage and control the economy by providing balance to counteract and correct the undesired direction of the current economy.