If the government undertakes expansionary fiscal policy,it:

Question

Quizplus · Accepted Answer

Expansionary fiscal policy means the government wants to stimulate economic activity by increasing government spending and/or reducing taxes. Therefore, option B is correct as the government must want to encourage economic activity. Option A is incorrect as income taxes may be decreased to encourage spending, not increased. Option C is incorrect as the government undertaking expansionary fiscal policy expects aggregate demand to increase, not decrease. Option D is incorrect as only option B is true.

If the Government Undertakes Expansionary Fiscal Policy,it