📚 Learning Guide
Expansionary Fiscal and Monetary Policies
easy

How does expansionary fiscal policy primarily aim to stimulate the economy during a recession?

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Learning Path

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Choose the Best Answer

A

By increasing government spending or cutting taxes

B

By raising interest rates to control inflation

C

By reducing government programs and services

D

By limiting borrowing to stabilize the economy

Understanding the Answer

Let's break down why this is correct

Answer

Expansionary fiscal policy is a way for the government to boost the economy, especially during tough times like a recession. When the economy slows down, people lose jobs and spend less money, which can make things worse. To help, the government can increase its spending on things like roads, schools, or healthcare, which creates jobs and puts money back into people's hands. For example, if the government builds a new highway, workers are hired for construction, and they will spend their earnings on food, clothing, and other goods. This increased spending helps businesses thrive and encourages more hiring, which can lead to economic recovery.

Detailed Explanation

This policy helps by increasing government spending or cutting taxes. Other options are incorrect because Some might think raising interest rates helps the economy; Reducing government programs might seem like a way to save money.

Key Concepts

Expansionary Fiscal Policy
Aggregate Demand
Economic Stimulus
Topic

Expansionary Fiscal and Monetary Policies

Difficulty

easy level question

Cognitive Level

understand

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