What impact does an expansionary fiscal policy action, such as a tax cut, generally have on consumer and business spending?(1 point)

Question

Responses

spending decreases for businesses and increases for consumers
spending decreases for businesses and increases for consumers

spending increases for both businesses and consumers
spending increases for both businesses and consumers

spending increases for businesses and decreases for consumers
spending increases for businesses and decreases for consumers

spending decreases for both businesses and consumers

Answer 1

The correct response is:

spending increases for both businesses and consumers

An expansionary fiscal policy action, such as a tax cut, typically puts more disposable income in the hands of consumers and can improve business confidence, leading to increased spending by both groups.