Which fiscal policy involves increasing government spending?

The concept of expansionary fiscal policy is centered around increasing government spending to stimulate economic growth. When the government increases its spending, it injects more money into the economy, which can lead to higher demand for goods and services. This increased demand can, in turn, drive businesses to produce more, potentially leading to job creation, reduced unemployment, and overall economic expansion.

In the context of macroeconomic objectives, expansionary fiscal policy is often employed during periods of recession or economic downturns when there is a need to boost economic activity. By increasing government expenditure on infrastructure projects, social programs, or other sectors, the government aims to stimulate the economy and combat slow growth or high unemployment.

On the other hand, contractionary fiscal policy involves reducing government spending or increasing taxes to cool down an overheated economy, not boosting it. Monetary policy relates to the management of money supply and interest rates by the central bank, and supply-side policy focuses on improving productivity and economic growth through incentives for production, rather than direct government spending. Therefore, expansionary fiscal policy is indeed defined by its approach to increasing government expenditure.