GENERAL KNOWLEDGE

Detailed explanation-1: -In the short term, governments may focus on macroeconomic stabilization-for example, expanding spending or cutting taxes to stimulate an ailing economy, or slashing spending or raising taxes to combat rising inflation or to help reduce external vulnerabilities.

Detailed explanation-2: -Multiplier effect Fiscal Multiplier is often seen as a way that spending can boost growth in the economy. This multiplier state that an increase in the government spending leads to an increase in some measures of economic wide output such as GDP.

Detailed explanation-3: -According to Keynesian economics, increased government spending raises aggregate demand and increases consumption, which leads to increased production and faster recovery from recessions.

Detailed explanation-4: -Economic stimulus refers to targeted fiscal and monetary policy intended to elicit an economic response from the private sector. Economic stimulus relies on encouraging private sector spending to make up for loss of aggregate demand. Fiscal stimulus measures include deficit spending and lowering taxes.

Detailed explanation-5: -Expansionary fiscal policy consists of tax cuts or increases in government spending designed to stimulate aggregate demand and move the economy out of recession.