A recession: Expansionary fiscal policy would be appropriate in response to a recession. This might include increasing government spending and/or cutting taxes, in order to boost demand and stimulate economic growth.
A stock market crash that hurts consumer and business confidence: Expansionary fiscal policy would also be appropriate in this scenario. By increasing government spending and/or cutting taxes, policymakers can boost demand and restore confidence in the economy.
Extremely rapid growth of exports: Contractionary fiscal policy would be appropriate in response to extremely rapid growth of exports. In this scenario, policymakers might consider reducing government spending and/or increasing taxes, in order to reduce demand and prevent the economy from overheating.
Rising inflation: Contractionary fiscal policy would also be appropriate in response to rising inflation. Policymakers might consider reducing government spending and/or increasing taxes, in order to reduce demand and curb inflationary pressures.
A rise in the natural rate of unemployment: Expansionary fiscal policy would be appropriate in response to a rise in the natural rate of unemployment. In this scenario, policymakers might consider increasing government spending and/or cutting taxes, in order to boost demand and create jobs.