Under a contractionary taxation policy, the government can reduce the deficit by increasing taxes. reducing taxes. increasing spending. reducing spending.

The answer is: A. increasing taxes

Most of government income is taken from income taxes that taken from the citizen's annual earning.

When the government is in a deficit, increasing taxes can be used as one of the way to increase government's income and covers the deficit. This type of policy often taken when the government is planning to make a huge spending on several government programs.

The citizens of United States live and work in a mixed market economy. It is a combination of command economic system and market economy. The market in this case is less free of government with the exceptions of crucial areas such as defense and transport. Mixed economic system incorporates capitalist and socialist policies.

Explanation:

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