expansionary

Expansionary is an adjective describing policies, measures, or conditions intended to promote growth, increase economic activity, or expand capacity. In economics, expansionary policy refers to actions aimed at increasing aggregate demand and output, typically during periods of recession or slow growth. It is often contrasted with contractionary policies that aim to cool an overheated economy.

Expansionary fiscal policy involves government actions such as increased spending on goods and services, higher transfer payments, or tax cuts to raise households' after-tax income and stimulate demand. Expansionary monetary policy involves central bank actions to lower policy interest rates, reduce reserve requirements, or purchase government bonds to inject liquidity and encourage borrowing and investment.

The intended effects are higher consumption and investment, job creation, and improved production capacity, though the ultimate outcome depends on timing, magnitude, and the economy's existing conditions. Risks include higher budget deficits and public debt, potential inflation if the economy reaches or nears full capacity, and possible misallocation of resources if stimulus is poorly targeted or delayed.

Historical usage includes countercyclical measures during recessions, such as stimulus packages and quantitative easing during the late 2000s and 2020s. The effectiveness of expansionary policy depends on factors like confidence, credit availability, and global conditions.

Related concepts include expansionary fiscal policy, expansionary monetary policy, and stabilization policy.