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Expansionary fiscal policy occurs when the Congress acts to cut tax rates or increase government spending, shifting the aggregate demand curve to the right. Contractionary fiscal policy occurs when Congress raises tax rates or cuts government spending, shifting aggregate demand to the left.
Expansionary fiscal policy includes either increasing government spending or decreasing taxes. An economy that is producing too much needs to be contracted. In that case, contractionary fiscal policy (either decreasing government spending or increasing taxes) is the correct choice.
Contractionary fiscal policy—a decrease in government spending, an increase in tax revenue, or a combination of the two—is expected to temporarily slow economic activity. When the government raises individual income taxes, for example, individuals have less disposable income and generally decrease their spending on goods and services in response.
Apr 17, 2024 · Expansionary fiscal policy includes tax cuts, transfer payments, rebates and increased government spending on projects such as infrastructure improvements. For example, it can increase...
Apr 5, 2022 · Expansionary fiscal policy is when the government expands the money supply in the economy using budgetary tools to either increase spending or cut —both of which provide consumers and businesses with more money to spend. In the United States, the president influences the process, but Congress must author and pass the bills.
Expansionary fiscal policy occurs when the Congress acts to cut tax rates or increase government spending, shifting the aggregate demand curve to the right. Contractionary fiscal policy occurs when Congress raises tax rates or cuts government spending, shifting aggregate demand to the left.
Expansionary fiscal policy—an increase in government spending, a decrease in tax revenue, or a combination of the two—is expected to temporarily spur economic activity.
