Answer to Question #51639 in Microeconomics for alexander
Lower taxes should increase disposable income of consumers leading to higher levels of consumer spending. This should also increase aggregate demand and could lead to higher economic growth.
Expansionary fiscal policy can also lead to inflation because of the higher demand in the economy.
Expansionary monetaty policy is traditionally used to try to combat unemployment in a recession by lowering interest rates in the hope that easy credit will entice businesses into expanding. This is done by increasing the money supply available in the economy.
Expansionary policy attempts to promote aggregate demand growth.
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