Expansionary fiscal policy refers to decisions about taxation and spending that:
A) increase aggregate demand.
B) decrease aggregate demand.
C) increase aggregate supply.
D) decrease aggregate supply.

Question

Quizplus · Accepted Answer

Expansionary fiscal policy involves increasing government spending and lowering taxes, which results in an increase in aggregate demand. This is because more money in the hands of consumers and businesses leads to higher consumption and investment, which leads to increased economic activity and output.

Expansionary Fiscal Policy Refers to Decisions About Taxation and Spending