If an economy has moved into an inflationary spiral, which of these fiscal policy actions might be taken?

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25-07-2022
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If an economy has moved into an inflationary spiral, which of these fiscal policy actions might be taken?

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tushargupta0691 tushargupta0691 · Answer 1 · 2022-08-05T03:23:07+02:00

If an economy has moved into an inflationary spiral, Increasing taxes on these Fiscal policy actions might be taken

The above answer to the given question is "Increasing Taxes".

Decreased government expenditure is one of the key weapons of contractionary fiscal policy, which is necessary for an inflationary spiral.

When does Economic Growth need to be halted?

If inflation becomes uncontrollably high, the economy may require a slowdown.

A government can employ fiscal policy in this case to raise taxes and drain money from the economy.
Government spending may need to be cut as a result of fiscal policy, which would reduce the amount of money in circulation.

Whom all does Fiscal Policy effect?

The middle class, which is often the largest economic group, maybe the only group to benefit from a tax cut, depending on the political preferences and objectives of the decision-makers.

This same group may be required to pay higher taxes than the wealthier upper class in times of economic downturn and increased taxes.

Hence, the correct answer is to increase tax.

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