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What is the effect of expansionary fiscal policy?
Practice Questions
Q1
What is the effect of expansionary fiscal policy?
Decrease in aggregate demand
Increase in aggregate demand
No effect on the economy
Increase in interest rates
Questions & Step-by-Step Solutions
What is the effect of expansionary fiscal policy?
Steps
Concepts
Step 1: Understand what expansionary fiscal policy is. It means the government is trying to boost the economy.
Step 2: Know that the government can do this by spending more money or by cutting taxes.
Step 3: When the government spends more, it creates jobs and increases demand for goods and services.
Step 4: When taxes are cut, people have more money to spend, which also increases demand.
Step 5: Increased demand can lead to higher production and more jobs, helping the economy grow.
No concepts available.
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