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

Answer 1

The correct response is:

spending increases for both businesses and consumers

An expansionary fiscal policy action, such as a tax cut, generally puts more disposable income in the hands of consumers, which typically leads to increased consumer spending. Additionally, businesses may also invest more as they have more capital available or expect increased demand from consumers, leading to increased business spending as well.