What is the primary function of expansionary policies?

The primary function of expansionary policies is to increase total demand within an economy. These policies are typically implemented by governments or central banks to stimulate economic activity, especially during periods of recession or economic downturn. By lowering interest rates, increasing government spending, or providing tax cuts, expansionary policies aim to boost consumer and business spending.

When total demand increases, it can lead to higher output and employment levels as businesses respond to the greater demand for goods and services. This approach is based on the belief that during times of economic slack, there is an opportunity to promote growth by encouraging more expenditure in the economy. Overall, the goal is to revive economic activity and support recovery by making it easier for consumers and businesses to borrow and spend.