Which outcome is typically expected from a government's expansionary fiscal policy?
Show answer & explanation
Correct answer: B
Explanation
The correct answer is option 2 i.e. Stimulation of economic growth.
An expansionary fiscal policy involves increasing government spending or reducing taxes to boost aggregate demand in the economy. The typical outcome is stimulation of economic growth, as higher spending increases consumption, investment, and overall economic activity.
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Increased government savings: Incorrect — expansionary policy usually reduces savings due to higher spending.
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Higher interest rates: Not a direct effect — that relates more to monetary policy.
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Reduced public spending and investment: Incorrect — expansionary policy increases spending, not reduces it.