📚 Learning Guide
Expansionary Fiscal and Monetary Policies
easy

What is a primary tool of expansionary fiscal policy used by governments to stimulate economic growth?

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Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
Explore Topic

Choose the Best Answer

A

Decreasing taxes

B

Increasing interest rates

C

Reducing government spending

D

Selling government bonds

Understanding the Answer

Let's break down why this is correct

Answer

A primary tool of expansionary fiscal policy is government spending. When the government increases its spending on projects like building roads, schools, or hospitals, it puts more money into the economy. This extra money helps create jobs and encourages people to buy more goods and services, which can lead to overall economic growth. For example, if a city decides to build a new bridge, the workers hired for the project will earn wages, and they will likely spend that money in local shops and restaurants. By increasing government spending, the government aims to boost economic activity and help lift the economy out of a slowdown.

Detailed Explanation

When the government lowers taxes, people have more money to spend. Other options are incorrect because Some might think raising interest rates helps the economy; Many believe cutting spending is good for saving money.

Key Concepts

Government spending
Topic

Expansionary Fiscal and Monetary Policies

Difficulty

easy level question

Cognitive Level

understand

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