Country’s real GDP declining—fiscal fix:

Raising taxes during a period of declining GDP can further reduce consumer spending and business investment, exacerbating the economic downturn. Higher taxes leave individuals and businesses with less disposable income, which can lead to decreased demand and further contraction of the economy.

Cutting government spending would likely lead to reduced demand in the economy, as public sector projects and services contribute significantly to overall economic activity. This approach could result in job losses and decreased consumer confidence, worsening the decline in GDP.

Tightening the money supply, usually through higher interest rates, can restrict borrowing and spending by consumers and businesses alike. This policy can slow down economic growth and lead to further declines in GDP, as it discourages investment and reduces liquidity in the market.