Why do policymakers sometimes use policies to limit growth? What will

Why do policymakers sometimes use policies to limit growth?

What will be an ideal response?

ANSWER

Policymakers sometimes use policies to limit growth because factors such as irrational optimism about the economy lead to unsustainable expansion. Left alone, unsustainable expansions can subsequently lead to very severe downturns because irrational optimism can implode suddenly and severely due to multiplier effects. Contractionary policy attempts to reduce this risk of a sudden and extreme contraction by putting gradual left ward pressure on the labor demand curve when policymakers think it is moving too quickly to the right.