Question

Expansionary fiscal policy tends to: Please choose the correct answer from the following choices,

have no effect on the budget balance.
decrease the size of a budget surplus.
decrease the size of a budget deficit.
increase the size of a budget surplus.

Answer 1

The correct answer is decrease the size of a budget surplus.

Step-by-step explanation:

Expansive fiscal policy is a type of fiscal policy criterion that is especially characterized by two main features: increased public spending and reduced tax collection through tax cuts.

Increasing public expenditure items in the budget of a country or territory and a decrease in taxes in it are usually the most prominent measures of expansive fiscal policy. They usually occur simultaneously, although they may occur sometimes without necessarily being taken at the same time.

Generally this type of policy is usually related to the concept of fiscal deficit. As the amount of public spending is greater than the bulk of taxes collected, the budget deficit increases. In other words, more money goes out in public services than what goes into taxes.