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What are expansionary and contractionary effects? 

Expansionary effect refers to the effect of raising the equilibrium level of national income. For example, an increase in government spending will have expansionary effect on the equilibrium level of national income. On the contrary, contractionary effect refers to the effect of lowering the equilibrium level of national income. For example, enhance in tax will have contractionary effect on the equilibrium level of national income. 

 

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M9574875

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