An example of an expansionary fiscal policy action is?

A. decrease in the corporate profit tax rates
B. decrease in welfare payments
C. purchase of government securities
D. decrease in the bank rate

Correct Answer:

Option A – decrease in the corporate profit tax rates

Explanation

Expansionary fiscal policy is when the government expands the money supply in the economy using budgetary tools to either increase spending or cut taxes—both of which provide consumers and businesses with more money to spend. Cutting down on tax rates would mean higher profits for businesses. This is done to increase the supply of money in the economy.