ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Fiscal policy that increases aggregate demand directly through an increase in government spending is typically called expansionary or “loose.”

Detailed explanation-2: -Expansionary policy is intended to boost business investment and consumer spending by injecting money into the economy either through direct government deficit spending or increased lending to businesses and consumers.

Detailed explanation-3: -Expansionary fiscal policy occurs when the Congress acts to cut tax rates or increase government spending, shifting the aggregate demand curve to the right. Contractionary fiscal policy occurs when Congress raises tax rates or cuts government spending, shifting aggregate demand to the left.

Detailed explanation-4: -Expansionary monetary policy is a tool central banks use to stimulate a declining economy and GDP. The Federal Reserve has three expansionary monetary policy methods: lowering interest rates, decreasing banks’ reserve requirements, and buying government securities.

Detailed explanation-5: -There are two main types of expansionary policy – fiscal policy and monetary policy. Expansionary monetary policy focuses on increased money supply, while expansionary fiscal policy revolves around increased investment by the government into the economy.