When does fiscal drag take place?

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When tax brackets remain unchanged despite inflationWhen tax rates decrease as inflation risesWhen the government reduces its expenditures to lower overall demandWhen tax bands rise in line with inflation

Explanation

Fiscal drag happens when tax brackets are not adjusted for inflation, causing taxpayers to move into higher tax rates even if their real income hasn't increased. This occurs because tax thresholds stay fixed while nominal incomes grow due to inflation.