Expansionary fiscal policy aims to increase aggregate demand and stimulate economic growth by increasing government spending or cutting taxes.

Increased interest rates are a tool of contractionary fiscal policy, not expansionary fiscal policy.

Increased government spending increases aggregate demand by injecting more money into the economy, which leads to increased production and employment.

Tax cuts increase disposable income and consumption, which leads to increased aggregate demand and economic growth.

Expansionary fiscal policy typically leads to an increase in the budget deficit, as government spending increases or tax revenues decrease.

Transfer payments, such as unemployment benefits or social security payments, increase disposable income and consumption, which leads to increased aggregate demand.

The impact of expansionary fiscal policy on interest rates depends on various factors, such as the size of the policy measures, the state of the economy, and the reaction of the central bank.

The main challenge in implementing expansionary fiscal policy is the risk of inflation, as increased government spending and tax cuts can lead to higher prices.

Supply-side policies, such as investments in infrastructure or education, can increase the productive capacity of the economy and help mitigate the risk of inflation associated with expansionary fiscal policy.

Monetary policy can support expansionary fiscal policy by reducing interest rates, which makes borrowing more attractive and stimulates investment and consumption.

The impact of expansionary fiscal policy on the exchange rate depends on various factors, such as the size of the policy measures, the state of the economy, and the reaction of international investors.

The long-term goal of expansionary fiscal policy is to achieve full employment, which means that everyone who wants to work can find a job.

Expansionary fiscal policy typically leads to a reduction in the unemployment rate, as increased government spending and tax cuts stimulate economic growth and create jobs.

Expansionary fiscal policy can lead to the risk of inflation, a budget deficit, and crowding out private investment, which can have negative consequences for the economy.

Expansionary fiscal policy is most effective during a recession, when the economy is contracting and needs a boost in aggregate demand.