Final answer:
An expansionary fiscal policy is a decrease in taxes aimed at achieving macroeconomic goals, such as increasing aggregate demand. Option (A) is correct.
Step-by-step explanation:
An expansionary fiscal policy is a decrease in taxes aimed at achieving macroeconomic goals. It increases aggregate demand through increases in government spending or reductions in tax rates. Expansionary policy can raise consumption, investment spending, and government purchases, ultimately stimulating the economy. Therefore, the correct answer is c. expansionary fiscal policy.
Expansionary fiscal policy includes tax cuts, transfer payments, rebates and increased government spending on projects such as infrastructure improvements. For example, it can increase discretionary government spending, infusing the economy with more money through government contracts.
Also known as loose monetary policy, expansionary policy increases the supply of money and credit to generate economic growth. A central bank may deploy an expansionist monetary policy to reduce unemployment and boost growth during hard economic times.
The two significant examples include increased government spending as well as tax cuts. These policies seek to raise aggregate demand while leading to deficits or drawing the decline of budget surpluses.