Final answer:
Fiscal policy can encourage economic growth through expansionary fiscal measures. By increasing government spending or reducing taxes, expansionary fiscal policy increases aggregate demand, promotes production and job creation, and stimulates consumption and investment.
Step-by-step explanation:
Fiscal policy can encourage economic growth through expansionary fiscal measures. Expansionary fiscal policy increases aggregate demand by either increasing government spending or reducing taxes. By increasing government spending, more money is injected into the economy, which can lead to increased production and job creation. Similarly, by reducing taxes, individuals and businesses have more disposable income, which can stimulate consumption and investment, and ultimately drive economic growth.