How does a contractionary monetary policy typically impact budget deficits during periods of economic growth?

A contractionary monetary policy means that a country's central bank is trying to reduce the amount of money available in the economy, often by increasing interest rates. When interest rates rise, borrowing becomes more expensive for both individuals and businesses. This can slow down spending and investment, which may lead to lower economic growth. During periods of economic growth, however, if the government is spending more than it earns in revenue, it can still run a budget deficit, but the impact of contractionary policies might lead to slower revenue growth. For example, if a government increases spending on infrastructure during a growth phase but faces higher interest costs due to contractionary policies, it might find that its budget deficit widens because it is not bringing in enough extra revenue to cover the increased expenses.