Expansionary policy typically includes which of the following actions?

Expansionary policy is aimed at stimulating economic growth, particularly during periods of recession or economic slowdown. The primary tools of expansionary fiscal policy include increasing government spending and decreasing taxes.

By decreasing taxes, individuals and businesses have more disposable income, which can lead to increased consumption and investment. This higher level of economic activity can stimulate demand in the economy, prompting businesses to expand and hire more employees, thus fostering overall economic growth.

Additionally, reducing taxes effectively injects money into the economy, making it a straightforward and impactful method of encouraging spending and investment. As people and businesses retain more of their earnings due to lower taxes, this can help boost aggregate demand and support recovery during economic downturns.

In contrast, increasing taxes or decreasing government spending would have a contractionary effect on the economy, likely leading to reduced consumer spending and overall economic activity, which is not the aim of an expansionary policy. Reducing military funding is more of a budgetary consideration rather than a direct tool for stimulating economic growth.