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.”

Detailed explanation-2: -Multiplier effect Fiscal Multiplier is often seen as a way that spending can boost growth in the economy. This multiplier state that an increase in the government spending leads to an increase in some measures of economic wide output such as GDP.

Detailed explanation-3: -By increasing or decreasing government spending on projects, the government is able to increase employment and economic growth. In a recession, a government can increase spending on various projects to stimulate the economy. An example is building public transit infrastructure.

Detailed explanation-4: -According to Keynesian economics, increased government spending raises aggregate demand and increases consumption, which leads to increased production and faster recovery from recessions.

Detailed explanation-5: -An increase in government spending is one of the factors that economists say can drive inflation. Other factors include interest rates, monetary policy, supply chain disruptions and fluctuations in demand for goods and services. Inflation can be an important consideration for investing, saving and borrowing.