Which of the following outcomes is typically sought through fiscal stimulus?

Which of the following outcomes is typically sought through fiscal stimulus?

• A. To lower public spending
• B. To create trade surpluses
• C. To revive demand and economic growth
• D. To limit government intervention

Answer: (C)

Fiscal stimulus is typically aimed at reviving demand and boosting economic growth during periods of economic downturn or recession. When an economy faces challenges such as high unemployment, low consumer spending, or sluggish growth, government intervention through fiscal stimulus measures, like increased public spending or tax cuts, is utilized to inject money into the economy. This increase in demand can lead to higher consumption by households and businesses, thereby driving economic growth. In contrast, lowering public spending, creating trade surpluses, or limiting government intervention generally do not align with the goals of fiscal stimulus. Lowering public spending may lead to reduced demand, while focusing on trade surpluses could divert attention from domestic economic needs. Limiting government intervention typically reflects a desire to reduce spending and regulation, which is counterproductive to the objectives of stimulating demand and fostering recovery in times of economic hardship. Thus, the focus of fiscal stimulus is clearly on stimulating demand and fostering economic growth, making it the correct choice.

Fiscal stimulus is typically aimed at reviving demand and boosting economic growth during periods of economic downturn or recession. When an economy faces challenges such as high unemployment, low consumer spending, or sluggish growth, government intervention through fiscal stimulus measures, like increased public spending or tax cuts, is utilized to inject money into the economy. This increase in demand can lead to higher consumption by households and businesses, thereby driving economic growth.

In contrast, lowering public spending, creating trade surpluses, or limiting government intervention generally do not align with the goals of fiscal stimulus. Lowering public spending may lead to reduced demand, while focusing on trade surpluses could divert attention from domestic economic needs. Limiting government intervention typically reflects a desire to reduce spending and regulation, which is counterproductive to the objectives of stimulating demand and fostering recovery in times of economic hardship. Thus, the focus of fiscal stimulus is clearly on stimulating demand and fostering economic growth, making it the correct choice.