what does it mean for an economic policy to be expansionary?
Workers may become unemployed and capital may sit idle, due to a lack of sufficient demand. To. reduce unemployment, expansionary fiscal policy (an increase in spending or a reduction in taxes. to expand aggregate demand) can be employed. The magnitude of the effects of fiscal policy is measured by a multiplier. If the government. spends a dollar, then someone in the economy receives a dollar. Part of that dollar might be saved. and part might be spent; to the extent that it is spent, it increases aggregate demand in a second. round.