Which of the following is an example of an expansionary fiscal policy?
A) the Fed selling government securities in the open market
B) the federal government increasing the marginal tax rate on incomes above $200,000
C) the federal government increasing the amount of money spent on public health programs
D) the federal government reducing pollution standards to allow firms to produce more output

Question

Quizplus · Accepted Answer

An expansionary fiscal policy is one that increases government spending or decreases taxes to boost economic activity. Choice A describes a contractionary monetary policy, not a fiscal policy. Choice B is a tax increase, which is a contractionary fiscal policy. Choice D is not a government action to increase spending or decrease taxes, but rather a deregulation action that may lead to increased production. Only choice C fits the definition of an expansionary fiscal policy as it involves an increase in government spending on public health programs.

Which of the Following Is an Example of an Expansionary