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Expansionary fiscal policy actions include increasing government spending and/or decreasing taxes, while contractionary fiscal policy actions include decreasing government spending and/or increasing taxes.
Fiscal policy is the government's authority to regulate and influence the economy. Fiscal policy might come in expansionary and contractionary strategy.
Expansionary fiscal policy aims to stimulates economy activity by providing more money for consumers and businesses. Expansionary fiscal policy aims to boost the economic demand. The government might cut taxes, transfer payments, rebates, and increase government spending.
Government will cut taxes so the people could spend more money to purchase products or to use it in investment plan. Government might increase its spending through infrastructure improvement and government contracts to infuse more money to the economy.
Contractionary fiscal policy is made by the government to slow down the economic growth and avoid inflation. Government might increase taxes to limit people's purchasing power and decrease its spending. Government also use contractionary fiscal policy to lowering asset prices.
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