Final answer:
To stimulate a slow economy and increase inflation, Congress would typically decrease taxes and increase government spending, applying expansionary fiscal policy. This stimulates economic activity by boosting disposable income and government-funded project creation.
Step-by-step explanation:
If the economy is slow and Congress wants to increase inflation, Congress will decrease taxes and increase government spending. This application of expansionary fiscal policy is designed to boost economic activity by putting more money into the hands of consumers and businesses, encouraging them to spend and invest more. When the government reduces taxes, individuals and corporations have more disposable income, which can lead to higher demand for goods and services. On the other hand, increased government spending can directly stimulate the economy by funding projects that create jobs and inject money into various sectors.
Historically, during recessions or periods of economic downturn, such as in the 2007-2009 Great Recession, a combination of tax cuts and spending increases have been used to stimulate economic activity. Expansionary fiscal policy, including tax cuts and increased spending, is often politically favorable as it directly supports economic growth and potentially reduces unemployment levels.