BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -Fiscal policy that increases aggregate demand directly through an increase in government spending is typically called expansionary or “loose.” By contrast, fiscal policy is often considered contractionary or “tight” if it reduces demand via lower spending.

Detailed explanation-2: -The Obama administration used expansionary policy with the Economic Stimulus Act. 9 The American Recovery and Reinvestment Act cut taxes, extended unemployment benefits, and funded public works projects.

Detailed explanation-3: -Definition. Contractionary fiscal policy is defined as the type of fiscal policy that works toward contracting the economy. Expansionary fiscal policy is defined as the policy that works towards promoting the consumption in the economy. It works for expansion of the economy. Impact on Aggregate Demand.