ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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lower taxes and decrease government spending
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raise taxes and increase government spending
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lower taxes and increase government spending
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raise taxes and decrease government spending
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Detailed explanation-1: -Expansionary fiscal policy is said to be in action when the government increases the spending and lowers tax rates for boosting economic growth.
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: -Effects of Expansionary Policy This leads to an increase in consumer spending, driving economic growth. After all, the end goal of expansionary policy is to heat up the economy. The primary effect (or intended effect) of expansionary policy is to make people acquire and spend more money.
Detailed explanation-4: -Expansionary Fiscal Policy – AD/AS Impact of expansionary fiscal policy – increases AD and leads to higher real GDP and inflation.