According to the short-run phillips curve, a contractionary fiscal policy will result in:
- Inflation Decreases
- Unemployment Increases
What is Contractionary fiscal policy?
Contractionary fiscal policy can be defined as a fiscal policy in which the money generated from tax is higher that the actual money spent.
Based on this with contractionary fiscal policy inflation which is the rise in price of goods and service will decrease while on the other hand unemployment rate will increase.
Inconclusion according to the short-run phillips curve, a contractionary fiscal policy will result in: Decrease in inflation.
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