Question

What is the expansionary fiscal policy of the government?

A. when the government’s expenditure exceeds its revenue
B. when the government’s revenue exceeds its expenditure
C. when the government increases the interest rate
D. when the government decreases the interest rate

Answer 1

D. when the government decreases the interest rate

Step-by-step explanation:

Fiscal policy can be defined as the use of taxes, government spending and transfers to stabilize an economy. Expansionary fiscal policy of the government is when the government of a country decreases its taxes and increases its expenditure. the word "fiscal" refers to tax revenue and government spending.

when the government reduces its interest rates, consumers pay less interest, they have more money to spend and there will be drastic effect to that because there will be more spending in the economy. businesses also benefits from this decreased interest as they will be motivated to buy equipment and obtain loan to boost their businesses and pay less interest.