The federal government recently increased funding for infrastructure projects and Social Security benefits while reducing individual income tax rates. Explain the fiscal policy being used in this situation.(1 point)

Question

Responses

An expansionary fiscal policy is being used because the decrease in tax rates decrease consumer and business spending and increase in government spending helps stimulate the economy.
An expansionary fiscal policy is being used because the decrease in tax rates decrease consumer and business spending and increase in government spending helps stimulate the economy.

A contractionary fiscal policy is being used because a decrease in tax rates decrease consumer spending and increased government spending slows down economic growth and inflation.
A contractionary fiscal policy is being used because a decrease in tax rates decrease consumer spending and increased government spending slows down economic growth and inflation.

An expansionary fiscal policy is being used because the decrease in tax rates increase consumer spending and increased government spending helps stimulate the economy.
An expansionary fiscal policy is being used because the decrease in tax rates increase consumer spending and increased government spending helps stimulate the economy.

A contractionary fiscal policy is being used because the decrease in tax rates decrease consumer spending and increased government spending slows down economic growth and inflation.

Answer 1

The correct response is:

An expansionary fiscal policy is being used because the decrease in tax rates increases consumer spending and increased government spending helps stimulate the economy.

This is because the increase in government spending on infrastructure and Social Security benefits aims to boost economic activity, while the reduction in individual income tax rates is intended to increase disposable income, leading to higher consumer spending. Both measures are designed to stimulate economic growth.