ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Tax cut is an example of expansionary fiscal policy.

Detailed explanation-2: -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-3: -The correct answer is Expansionary. The expansionary policy aims to stimulate the economy by boosting demand through monetary and fiscal stimulus.

Detailed explanation-4: -The two major examples of expansionary fiscal policy are tax cuts and increased government spending. Both of these policies are intended to increase aggregate demand while contributing to deficits or drawing down budget surpluses.

Detailed explanation-5: -Expansionary fiscal policy, designed to stimulate the economy, is most often used during a recession, times of high unemployment or other low periods of the business cycle. It entails the government spending more money, lowering taxes or both.