Which outcome is typically expected from a government's expansionary fiscal policy?

Correct option is D

The Correct Answer is D: Stimulation of economic growth.

Explanation:

• Expansionary fiscal policy involves increasing government spending or cutting taxes to boost economic activity.
• It aims to stimulate demand, create jobs, and increase GDP growth.

Key Points:

• Used during recessions or economic slowdowns.
• Can lead to higher budget deficits but promotes short-term economic recovery.
• Often results in higher inflation if demand outpaces supply.

Additional Information:

• Higher interest rates are more commonly associated with contractionary monetary policy.
• Reduced public spending and investment align with austerity measures rather than expansion.
• Increased government savings usually happens under fiscal consolidation, not expansion.