What does contractionary fiscal policy aim to achieve?

Contractionary fiscal policy aims to achieve a decrease in government spending or an increase in taxes. This type of policy is implemented by the government to combat inflation or to stabilize an economy that may be overheating. When the economy is growing too quickly, it can lead to increased demand, fueling inflation. By reducing government spending or raising taxes, the government effectively decreases the total amount of money circulating in the economy, which in turn can help to slow down economic activity and reduce inflationary pressure. This intentional pullback helps maintain economic stability in the long run.

The other options do not accurately reflect the objectives of contractionary fiscal policy. For instance, the expansion of government projects and job creation would typically be associated with expansionary fiscal policy, which aims to stimulate the economy rather than rein it in. Similarly, increasing consumer confidence and spending or reducing taxes to boost disposable income are strategies employed to encourage economic growth, not to address inflation or economic overheating, which is the primary goal of contractionary measures.