Which of the following best describes expansionary fiscal policy?

Expansionary fiscal policy is aimed at stimulating economic growth, particularly during periods of recession or economic downturn. It typically involves two main components: decreasing taxes and increasing government spending.

By decreasing taxes, more disposable income is made available to individuals and businesses, encouraging them to spend and invest more. This can help boost consumer demand, which is crucial for economic recovery. On the other hand, increased government spending injects money directly into the economy, whether through infrastructure projects, public services, or social programs. This expenditure creates jobs and further increases demand, leading to a cycle of economic activity.

The choices of restricting spending, increased taxes on high income, or reducing public investments contradict the principles of expansionary fiscal policy, as they would generally aim to slow down economic activity rather than stimulate it. Thus, the correct description encapsulates the essence of expansionary fiscal policy through the tactics of decreasing taxes and increasing spending.