Question

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

spending increases for both businesses and consumers

spending decreases for businesses and increases for consumers

spending increases for businesses and decreases for consumers

spending decreases for both businesses and consumers

Answer 1

spending increases for both businesses and consumers

Explanation: A tax cut leaves households and firms with more disposable income/profits, which typically raises consumer spending and business investment—an expansionary effect.