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 decreases for both businesses and consumers
spending decreases for both businesses and consumers

spending increases for businesses and decreases for consumers

Answer 1

The correct response is:

spending increases for both businesses and consumers.

Expansionary fiscal policy actions, such as tax cuts, typically lead to increased disposable income for consumers and more available capital for businesses, which generally results in increased spending by both groups.