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: -Contractionary fiscal policy is when the government either cuts spending or raises taxes. It gets its name from the way it contracts the economy. It reduces the amount of money available for businesses and consumers to spend.

Detailed explanation-3: -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-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: -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.