Expansionary fiscal policy is used to a. increase the amount of money in the economy b. decrease the amount of money in the economy c. decrease the money in the economy, then increase it d. increase the money in the economy, then decrease it

The answer is A increase the amount of money in the economy

The correct answer is A.

An expansionary fiscal policy aims to boost aggregate demand and, therefore, it increases the amount of money in circulation in the economy. It is performed by either:

Increasing goverment spending, for example, by using it for conducting public work projects. By hiring people for those projects, unemployment is decreased and more people is earning a salary that they will use to consume more products, services, and to invest too. Therefore, overall GDP figures increase.Decreasing taxes, which enhances the amount of income that the economic agents in the economy are able to direct to consumption or investments, decreasing total GDP too.

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