Question

The government can use ________ in the form of ________ to increase the level of aggregate demand in the economy. a contractionary fiscal policy; a reduction in taxes an expansionary fiscal policy; an increase in corporate taxes an expansionary fiscal policy; an increase in government spending previousnext

Answer 1

The government can use an expansionary fiscal policy in the form of an increase in government spending. An expansionary fiscal policy is exactly what it sounds like: it is a way to expand spending money. Here, we are discussing how the government can use a way to expand the amount of free money they have liquid. This can be done by actually putting more money back into the economy via government spending.