Final answer:
Expansionary fiscal policy, incorporating measures like tax reductions and raised government spending, is employed to stimulate the economy, especially during recessions to bolster aggregate demand and lower unemployment.
Step-by-step explanation:
Expansionary fiscal policy is used to stimulate the economy. During periods of recession and high unemployment, governments can employ expansionary fiscal policy measures such as lowering taxes or increasing government spending. These actions aim to increase the level of aggregate demand, thereby boosting economic activity and reducing unemployment.
Lower taxes leave individuals and businesses with more disposable income, which in turn can lead to increased consumption and investment. Meanwhile, heightened government spending can directly fuel economic growth through public projects and increased demand for goods and services. This form of fiscal policy is particularly useful when an economy is producing below its potential Gross Domestic Product (GDP).