Expansionary fiscal policy is when the government _____ .

Expansionary fiscal policy refers to government strategies aimed at stimulating economic growth, especially during periods of recession or economic slowdown. The core components of this policy include increasing government spending and decreasing taxes.

When the government increases spending, it injects more money into the economy, creating jobs and increasing demand for goods and services. This, in turn, can help boost overall economic activity. Simultaneously, when taxes are decreased, consumers and businesses have more disposable income, which can lead to increased consumption and investment. Both of these actions work together to promote economic growth and counteract downturns.

The other options do not align with the definition of expansionary fiscal policy. Reducing spending and increasing taxes would typically contract the economy, balancing the budget relates more to fiscal responsibility than stimulus, and funding private enterprises does not directly reflect government spending or tax modification as a means to influence overall economic activity.