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: -expansionary fiscal policy the use of fiscal policy to expand the economy by increasing aggregate demand, which leads to increased output, decreased unemployment, and a higher price level. Expansionary fiscal policy is used to fix recessions.

Detailed explanation-3: -What Fiscal Policy Increases Aggregate Demand? Expansionary fiscal policy that is intended to increase aggregate demand includes cutting taxes and increasing government spending. Both provide more money to consumers and businesses, allowing them to purchase and invest.

Detailed explanation-4: -Fiscal policy that increases aggregate demand directly through an increase in government spending is typically called expansionary or “loose.”

Detailed explanation-5: -An expansionary fiscal policy seeks to increase aggregate demand through a combination of increased government spending and tax cuts.