Expansionary fiscal policy:
A) decreases aggregate demand.
B) occurs when the government cuts taxes and/or increases spending.
C) occurs when the government increases taxes and cuts spending.
D) occurs when the government cuts taxes by less than it cuts spending.

Question

Quizplus · Accepted Answer

Expansionary fiscal policy is aimed at increasing aggregate demand through government actions such as cutting taxes and/or increasing government spending. This stimulates economic activity by putting more money into consumers' hands and by increasing government expenditures.

Expansionary Fiscal Policy