Expansionary fiscal policy primarily aims to combat which of the following economic conditions?

Expansionary fiscal policy primarily aims to combat which of the following economic conditions?

• A. Inflation
• B. Recession
• C. Stagnation
• D. Deflation

Answer: (B)

Expansionary fiscal policy is designed to stimulate economic growth, primarily in times of recession. During a recession, economic activity slows down significantly, leading to reduced consumer spending, increased unemployment, and lower levels of investment. In response, governments can implement expansionary fiscal measures, such as increasing government spending or cutting taxes, which aim to inject more money into the economy. This increased spending can help boost demand for goods and services, leading to higher production, job creation, and overall economic recovery. By targeting the specific challenges associated with a recession, such as low consumer confidence and decreased spending, expansionary fiscal policy seeks to reverse the decline in economic activity. This approach is less effective in addressing situations like inflation, stagnation, or deflation, which require different fiscal strategies to improve overall economic conditions.

Expansionary fiscal policy is designed to stimulate economic growth, primarily in times of recession. During a recession, economic activity slows down significantly, leading to reduced consumer spending, increased unemployment, and lower levels of investment. In response, governments can implement expansionary fiscal measures, such as increasing government spending or cutting taxes, which aim to inject more money into the economy. This increased spending can help boost demand for goods and services, leading to higher production, job creation, and overall economic recovery.

By targeting the specific challenges associated with a recession, such as low consumer confidence and decreased spending, expansionary fiscal policy seeks to reverse the decline in economic activity. This approach is less effective in addressing situations like inflation, stagnation, or deflation, which require different fiscal strategies to improve overall economic conditions.