Which of the following sequence of events follows an expansionary fiscal policy?

Question

Quizplus · Accepted Answer

Expansionary fiscal policy increases government spending and/or reduces taxes. This leads to an increase in aggregate demand, which in turn leads to an increase in output, employment, and inflation. In option B, the sequence of events shows an increase in government spending which leads to an increase in output and employment, followed by an increase in inflation as demand pressures build up in the economy.

Which of the Following Sequence of Events Follows an Expansionary