A government might enact expansionary spending when it is trying to:

• A. increase interest rates
• B. decrease the national debt
• C. reduce inflation during an economic boom
• D. stimulate economic growth during a recession

Answer: (D)

Verified step by step guidance

1. Step 1: Understand what expansionary fiscal policy means. Expansionary spending refers to increased government expenditures aimed at boosting economic activity.
2. Step 2: Recognize the typical goals of expansionary fiscal policy. It is usually implemented to stimulate economic growth, especially during periods of recession or economic downturn.
3. Step 3: Analyze the options given: increasing interest rates, decreasing national debt, reducing inflation during a boom, and stimulating growth during a recession. Expansionary spending generally does not aim to increase interest rates or reduce inflation; it often leads to lower interest rates and higher inflation.
4. Step 4: Recall that expansionary spending increases aggregate demand by injecting more money into the economy, which helps to counteract recessionary gaps and promote growth.
5. Step 5: Conclude that the correct purpose of expansionary spending is to stimulate economic growth during a recession, as it helps to increase output and reduce unemployment.