The combination of expansionary fiscal policy and low interest rates is most likely to promote economic growth because it creates conditions that encourage spending and investment.
Expansionary fiscal policy involves increasing government spending or decreasing taxes to stimulate the economy. When the government spends more on infrastructure, education, or social programs, it directly injects money into the economy, leading to increased demand for goods and services. This can create jobs and boost consumer confidence, resulting in higher overall economic activity.
Low interest rates complement this policy by making borrowing cheaper for consumers and businesses. When interest rates are low, businesses are more likely to invest in expansion, equipment, and hiring new employees. Simultaneously, consumers are encouraged to take loans for significant purchases, such as homes and cars, which further propels economic growth.
This combination fosters an environment conducive to economic growth by increasing aggregate demand, thereby leading to higher production, employment, and income levels.