Expansionary fiscal policy is used to increase aggregate demand in an attempt to fight rising inflation.

Question

Quizplus · Accepted Answer

Expansionary fiscal policy is used to stimulate economic growth by increasing government spending and/or decreasing taxes. It is typically used during times of recession or economic downturn when there is a lack of aggregate demand. This policy may increase inflation, so expansionary fiscal policy is not used to fight inflation. Rather, contractionary fiscal policy, which involves decreasing government spending and/or increasing taxes, is typically used to combat rising inflation.

Expansionary Fiscal Policy Is Used to Increase Aggregate Demand in an Attempt