What is the primary goal of contractionary fiscal policy?

The primary goal of contractionary fiscal policy is to fight inflation. This type of policy involves reducing government spending and/or increasing taxes to decrease the overall level of demand in the economy. When inflation is high, it indicates that prices are rising too quickly, which can erode purchasing power and destabilize the economy. By implementing contractionary fiscal measures, the government seeks to cool down economic activity, reduce demand for goods and services, and ultimately help stabilize prices.

The other options describe objectives that are the opposite of contractionary fiscal policy. Stimulating economic growth would typically involve increasing government spending or reducing taxes, making it a characteristic of expansionary fiscal policy instead. Similarly, increasing government spending and expanding the money supply are actions intended to stimulate the economy rather than contract it. Thus, contractionary fiscal policy is specifically designed to combat inflation by dampening economic activity.