According to Keynes, if aggregate income is too high (i. e, an inflationary gap is developing) the government should use contractionary fiscal policy a. True
b. False

True

Explanation:

According to Keynes, if aggregate income is too high (i.e, an inflationary gap is developing) the government should use contractionary fiscal policy.

Fiscal policy in economics deals with government expenditure and income.

Therefore, c fiscal policy is a monetary measure which involves a reduction in government spending or an increase in tax. It is used to reduce the rates of monetary expansion by putting limits on the flow of money in the economy.

Contractionary fiscal policy is used to control inflation in an economy.

Expansionary fiscal policy is the opposite of contractionary fiscal policy. Expansionary fiscal policy is the increase in government spending and a decrease in tax. It is used to control deflationary gap.

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