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Contractionary fiscal policy is designed to reduce aggregate demand in an economy that is growing too quickly. This approach is typically implemented through measures such as increasing taxes and decreasing government spending. By doing so, the overall level of demand within the economy is lowered, which can help to control inflation and prevent the economy from overheating.

During periods of rapid economic expansion, there may be a risk of inflation, where prices rise significantly due to increased consumer spending and business investment. Implementing contractionary fiscal policy helps to stabilize the economy by calming excessive growth, thereby allowing for more sustainable long-term economic conditions.

The other choices focus on different economic objectives that do not align with the primary aim of contractionary fiscal policy. Stimulating economic growth, funding government projects, and reducing unemployment are typically associated with expansionary fiscal policies, which aim to boost demand rather than restrict it.