SSC MTS EXAM

Detailed explanation-1: -The two major examples of expansionary fiscal policy are tax cuts and increased government spending.

Detailed explanation-2: -Answer and Explanation: The correct answer is C) A decrease in taxes. This option is correct because a tax decrease is an example of an expansionary fiscal policy. As taxes decrease, the IS curve shifts rightward, which increases the aggregate demand curve.

Detailed explanation-3: -Fiscal policy is enacted by a country’s government through spending and taxes to influence a nation’s economic conditions. To help fight a recession, fiscal policy may aim to lower taxes and increase federal spending to increase aggregate demand.

Detailed explanation-4: -Expansionary fiscal policy increases the level of aggregate demand, either through increases in government spending or through reductions in taxes. Expansionary fiscal policy is most appropriate when an economy is in recession and producing below its potential GDP.