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 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 businesses and increases for consumers
spending decreases for businesses and increases 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, such as a tax cut, typically leaves consumers with more disposable income and can enhance business investment by increasing their after-tax profits. This generally leads to an increase in spending by both consumers and businesses.