Which of the following most clearly indicates that fiscal policy is becoming more expansionary?

Question

Quizplus · Accepted Answer

Fiscal policy becoming more expansionary means that the government is increasing its spending and/or decreasing taxes to stimulate economic growth. An increase in the budget deficit relative to GDP indicates that the government is spending more than it is collecting in revenue, which is a sign of expansionary fiscal policy. Choice B suggests that the opposite is happening - a reduction in the deficit relative to GDP would indicate that the government is collecting more revenue and/or spending less, which is contractionary fiscal policy. Choice C is unlikely to occur during a period of expansionary fiscal policy, as it would mean the government is collecting more revenue than it is spending. Choice D doesn't necessarily indicate whether fiscal policy is becoming more expansionary or contractionary, as it only reflects the nominal size of the deficit and not how it relates to the overall economy.

Which of the Following Most Clearly Indicates That Fiscal Policy