Define expansionary fiscal policy.

Understand the Problem

The question is asking for a definition and explanation of expansionary fiscal policy, including its objectives and mechanisms.

Answer

Increasing government spending and reducing taxes to boost economic activity.

Expansionary fiscal policy involves increasing government expenditures and/or decreasing taxes to stimulate economic growth.

Answer for screen readers

Expansionary fiscal policy involves increasing government expenditures and/or decreasing taxes to stimulate economic growth.

More Information

It is typically used during periods of recession or economic slowdown.

Tips

Do not confuse it with expansionary monetary policy, which involves central bank actions to influence money supply.

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