ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Expansionary fiscal policy is most appropriate when an economy is in recession and producing below its potential GDP.

Detailed explanation-2: -Expansionary fiscal policy is used to fix recessions. the use of fiscal policy to contract the economy by decreasing aggregate demand, which will lead to lower output, higher unemployment, and a lower price level. Contractionary fiscal policy is used to fix booms.

Detailed explanation-3: -Contractionary policy is used to control inflation. Expansionary fiscal policy is said to be in action when the government increases the spending and lowers tax rates for boosting economic growth. This increases consumption as there is a rise in purchasing power.

Detailed explanation-4: -Stimulating Expansionary Monetary Policies. The central bank will often use policy to stimulate the economy during a recession or in anticipation of a recession. Expanding the money supply is meant to result in lower interest rates and borrowing costs, with the goal to boost consumption and investment.

Detailed explanation-5: -The Fed has several monetary policy tools it can use to fight off a recession. It can lower interest rates to spark demand and increase the amount of money in circulation via open market operations (OMO), including quantitative easing (QE), through which additional types of assets may be purchased by the Fed.