Final answer:
A government is least likely to increase spending during a deficit when the economy is already performing well and at risk of inflation. Contractionary fiscal policies are more appropriate in such scenarios to prevent overheating of the economy.
Step-by-step explanation:
A government is least likely to allow for increased spending during a deficit in a situation where the economy is already doing well, with high output and GDP well above potential, which could lead to inflationary pressures. This contrasts with a recessionary period when increased spending could help stimulate economic activity without the risk of triggering inflation. In prosperous economic times, governments might consider contractionary fiscal policy, which involves spending cuts or tax increases to prevent an overheating economy and guard against inflation.
For example, during the late 1990s and early 2000s, the U.S. faced a rapidly growing GDP and low unemployment rates. However, instead of pursuing policies that would cut spending or increase taxes to slow down the economy, politicians continued proposing expansionary initiatives.
More recently, as of February 2017, plans for significant increases in defense and infrastructure spending along with tax cuts were proposed, indicating a continued preference for expansionary fiscal policy despite the implications for the federal budget deficit.