Question

Is expansionary fiscal policy more attractive to politicians who believe in larger government or to politicians who believe in smaller government? Explain your answer.

Short answer

Expansionary fiscal policy is more attractive to politicians who believe in larger government, as it aligns with their belief that government intervention can help stimulate economic activity and improve social welfare through increased spending on public goods and services or tax cuts for certain segments of the population. In contrast, politicians who believe in smaller government might be more skeptical of expansionary fiscal policies, focusing on reducing government intervention in the economy and prioritizing fiscal responsibility.

Step-by-step solution

Define expansionary fiscal policy

Expansionary fiscal policy refers to the measures adopted by the government to increase economic activity through increased government spending or reduced taxes. These actions aim to encourage consumer spending, boost employment, investment, and overall economic growth. The main tools for expansionary fiscal policy are government spending (infrastructure projects, social programs, etc.) and tax cuts.

Understand the beliefs of politicians who support larger government

Politicians who believe in larger government generally argue that the government should play a more active role in regulating and guiding the economy. They believe that through effective policy, the government can improve social welfare, reduce inequality, and ensure economic stability. These politicians might advocate for increased spending on public goods like transportation, education, and healthcare, as well as social programs to aid vulnerable populations.

Understand the beliefs of politicians who support smaller government

Politicians who believe in smaller government, on the other hand, argue that the private sector should drive economic growth and development with minimal government intervention. They believe that cutting taxes and reducing regulatory burdens will spur innovation, investment, and job creation in the private sector, ultimately benefiting society as a whole. These politicians often prioritize fiscal responsibility, limiting government spending and balancing budgets.

Determine which group finds expansionary fiscal policy more attractive

Given the definitions and goals of each group, politicians who believe in larger government will likely find expansionary fiscal policy more attractive. Expansionary fiscal policy directly aligns with their belief that government intervention can help stimulate economic activity and improve social welfare through increased spending on public goods and services or tax cuts for certain segments of the population. These politicians might see expansionary fiscal policy as an effective means to reduce unemployment, support economic growth, or combat income inequality. In contrast, politicians who believe in smaller government might be more skeptical of expansionary fiscal policies, focusing on reducing government intervention in the economy and prioritizing fiscal responsibility. In conclusion, expansionary fiscal policy would generally be more appealing to politicians who believe in larger government, as it aligns with their goals and beliefs about the role of government in the economy.