The leaders of a small country decide that they need to enact a contractionairy fiscal policy which action is consistent with this fiscal policy? a( reduce taxes b) lower its discount rate c) reduce government spendingd) lower its prices of securities

The correct answer is C) reduce government spending.

The leaders of a small country decide that they need to enact a contractionary Fiscal policy. The action that is consistent with this Fiscal policy is "reduce government spending."

This type of fiscal policy is aimed at the creation of new taxes and the considerable reduction of government expenditure in order to reduce inflation or trying to control the pressure that inflation exerts on an economy. This is a way to dimish people's consumption because the taxes are higher or there are more, so people are dissuaded to buy products.

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