What does expansionary fiscal policy aim to address?

Expansionary fiscal policy is designed to stimulate economic growth, particularly during periods of economic downturn or recession. When an economy is struggling, unemployment is high, and consumer spending is low, expansionary fiscal policy aims to inject money into the economy through increased government spending and tax cuts. This can encourage consumer spending and business investment, ultimately facilitating job creation and helping to boost overall economic activity.

In contrast, increased taxation rates and reducing government spending are typically associated with contractionary fiscal policies, which aim to cool down an overheated economy or manage inflation. Inflation control measures may also be implemented during periods of growth rather than recession. Therefore, focusing on combatting a recession aligns directly with the objectives of expansionary fiscal policy, which seeks to foster a more vibrant economic environment.