According to macroeconomic theory and money supply in the economy, the scenario as an example of expansionary fiscal policy includes "<u>A decrease in taxes."</u>
Other scenarios as an example of expansionary fiscal policy include the following:
- An increase in government spending;
- An increase in corporate bonds purchased;
- An increase in the money supply;
Expansionary fiscal policy is a type of policy designed to increase the money supply in the economy.
On the other hand, examples of contractionary fiscal policy include the following:
- A decrease in government spending;
- A decrease in transfer payments to dampen economic activity;
- An increase in taxes;
- A decrease in the money supply;
Contractionary fiscal policy is a type of policy designed to decrease the money supply in the economy.
However, the scenarios which are considered as not examples of fiscal policy include the following:
- A decrease in the unemployment rate;
Hence, in this case, it is concluded that fiscal policy used by the government can either be expansionary or contractionary.
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