Answer to Question #99878 in Economics of Enterprise for josh

Question

Used in the expansion phase of the business cycle when inflation is the problem; involves decreasing government spending or increasing taxes, or a combination of both.

Answer 1

It is a political decision, rather than economic. one individual or mix approach can be adopted.

conservatives and Republicans prefer to see expansionary fiscal policy carried out by tax cuts, while liberals and Democrats prefer that expansionary fiscal policy be implemented through spending increases

However, state and local governments, whose budgets were also hard hit by the recession, began cutting their spending—a policy that offset federal expansionary policy.