ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -An expansionary fiscal policy lowers tax rates or increases spending to increase aggregate demand and fuel economic growth. A contractionary fiscal policy raises rates or cuts spending to prevent or reduce inflation.

Detailed explanation-2: -During expansionary periods, governments can increase spending on infrastructure projects, social programs, and other initiatives to boost demand and stimulate economic growth. They may also enact tax cuts to reduce taxes, which puts more money in consumers’ pockets and stimulates spending.

Detailed explanation-3: -Fiscal policy that increases aggregate demand directly through an increase in government spending is typically called expansionary or “loose.”

Detailed explanation-4: -An expansionary fiscal policy involves increasing spending or cutting taxes to prevent or end a recession or depression. A contractionary fiscal policy involves cutting spending or raising taxes to slow down unsustainable economic growth.

Detailed explanation-5: -Also known as loose monetary policy, expansionary policy increases the supply of money and credit to generate economic growth. A central bank may deploy an expansionist monetary policy to reduce unemployment and boost growth during hard economic times.