Fiscal Tightening
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ECONOMICS
Fiscal Policy
Fiscal Tightening
Fiscal tightening can paradoxically deepen recessions despite aiming to stabilize economies
10 Feb 2026
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What is a major risk of implementing fiscal tightening too abruptly during an economic downturn?
It can reduce overall demand and potentially deepen the recession.
It immediately boosts economic growth by increasing government spending.
It has no impact on unemployment rates or business investment.
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