ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Expansionary fiscal policy is intended to boost growth to a healthy economic level, which is required during the business cycle’s contractionary period. The government seeks to reduce unemployment, raise consumer demand, and stop the recession.

Detailed explanation-2: -Expansionary fiscal policy tools include increasing government spending, decreasing taxes, or increasing government transfers. Doing any of these things will increase aggregate demand, leading to a higher output, higher employment, and a higher price level.

Detailed explanation-3: -The purpose of expansionary fiscal policy is to boost growth to a healthy economic level, which is needed during the contractionary phase of the business cycle. The government wants to reduce unemployment, increase consumer demand, and avoid a recession.

Detailed explanation-4: -Expansionary fiscal policy is most appropriate when an economy is in recession and producing below its potential GDP. Contractionary fiscal policy decreases the level of aggregate demand, either through cuts in government spending or increases in taxes.

Detailed explanation-5: -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.