Which of the following is the strongest evidence of a shift toward a more expansionary fiscal policy?
A) an increase in government spending as a share of the economy and an expansion in the size of the budget deficit
B) a reduction in government spending as a share of the economy and a shift of the budget toward a surplus
C) an increase in government spending as a share of the economy and a shift of the budget toward a surplus
D) a reduction in government spending as a share of the economy and an expansion in the size of the budget deficit

Question

Quizplus · Accepted Answer

An increase in government spending as a share of the economy and an expansion in the size of the budget deficit are both indicators of a shift toward a more expansionary fiscal policy. This is because expansionary fiscal policy involves increasing government spending and/or reducing taxes in order to stimulate economic growth. An increase in government spending and a larger budget deficit indicate that the government is increasing its spending, which can provide a boost to the economy.

Which of the Following Is the Strongest Evidence of a Shift