GENERAL KNOWLEDGE

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 fiscal policy is said to be in action when the government increases the spending and lowers tax rates for boosting economic growth. This increases consumption as there is a rise in purchasing power.

Detailed explanation-3: -Expansionary policy is a set of economic measures taken by a government or central bank to stimulate economic growth. These policies are intended to increase demand and aggregate spending.

Detailed explanation-4: -A contractionary policy attempts to slow the economy by reducing the money supply and fending off inflation. An expansionary policy is an effort that central banks use to stimulate an economy by boosting demand through monetary and fiscal stimulus.

Detailed explanation-5: -By utilising subsidies, transfer payments (inclusive of welfare programs), and tax cuts on wages, expansionary fiscal policy brings more money into the hands of consumers to give them more purchasing power.