Expansionary fiscal policy does NOT include a(n):
A) increase in government transfers.
B) increase in government purchases.
C) increase in tax rates.
D) reduction in marginal tax rates.

Question

Quizplus · Accepted Answer

Expansionary fiscal policy is designed to stimulate economic growth and increase aggregate demand. This is typically achieved through an increase in government transfers (A) or government purchases (B), which injects money into the economy. Reductions in marginal tax rates (D) can also stimulate economic activity by putting more money into consumers' pockets. However, an increase in tax rates (C) reduces disposable income for consumers and businesses, which decreases aggregate demand and economic growth. Thus, it is not a part of expansionary fiscal policy.

Expansionary Fiscal Policy Does NOT Include A(n)