Question

The goal of expansionary fiscal policy is______.

Answer 1

Answer:

C. to increase aggregate demand.

Explanation:

Aggregate demand describes the total amount of all finished goods and services demanded in a country in a period. Aggregate is a reflection on the purchasing power of consumers in an economy.  A decrease in aggregate demand implies the economic power of consumers has decreased. A high inflation rate, low income, or high rate of unemployment can cause the aggregated demand to declines.

Expansionary fiscal policies are government actions of reducing taxes or increasing expenditure on stimulus programs. Reducing taxes increases the disposable income of consumers. It encourages firms to expand their businesses.  An increase in disposable means consumers will have more money to spend, which boosts aggregate demand. If the government spends money on stimulus programs such as the construction of roads and public buildings, it creates employment and income for more people.