Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
To decrease aggregate demand
B
To stabilize prices
C
To increase aggregate demand
D
To reduce unemployment
Understanding the Answer
Let's break down why this is correct
Answer
The primary goal of expansionary fiscal and monetary policies is to increase aggregate demand, which is the total amount of goods and services that people want to buy in an economy. When the government uses expansionary fiscal policy, it may increase spending on things like roads or schools or cut taxes, putting more money in people's pockets. This encourages consumers to spend more, which boosts demand. On the other hand, expansionary monetary policy involves lowering interest rates or increasing the money supply, making it cheaper for people and businesses to borrow money. For example, if the government cuts taxes and the central bank lowers interest rates, a family might decide to buy a new car, which helps the economy grow by increasing overall demand.
Detailed Explanation
The main aim of these policies is to boost aggregate demand. Other options are incorrect because Some might think these policies lower demand, but they actually aim to raise it; Stabilizing prices is important, but it is not the main goal here.
Key Concepts
Aggregate demand
Topic
Expansionary Fiscal and Monetary Policies
Difficulty
easy level question
Cognitive Level
understand
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