Question

In the Keynesian Model, which of the following is considered Expansionary Fiscal Policy?

		increasing the Money Supply.
		decreasing the Money Supply.
		cutting Government purchases (G).
		cutting Net Taxes (T).

Answer 1

The correct answer is 'Option D'.

The expansionary fiscal policy is a type of fiscal policy in which the government stimulates the economy by increasing the aggregate demand. There are two ways to implement the expansionary fiscal policy. The government can implement the expansionary fiscal policy by increasing government spending or by reducing the taxes which increases the consumption expenditure and increases aggregate demand in the economy. So, the correct answer is 'Option D'.