Expansionary economic policy strives to create and increase the money supply in order to increase economic growth and at the same time inflation as well.  This policy also focuses on the banking system and the increase of money supply throughout the economy. Increased government investment can lead to an increase in jobs, income, and greater aggregate demand. The flip side of this is a decline, which in fiscal terms, is an overall slowdown in economic activity and productivity. During times of recession, economic activity falls and ultimately affects unemployment rates, productivity, gross domestic product (GDP), and the status of sales and purchasing.  Times of recession can often be considered a normal part to any cycle of business; however, this is usually not prolonged and likely followed by a long period known as economic expansion. In an effort to move economy forward, the government has expansionary economic policies that can be set in place to assist in these efforts (Pettinger, 2017). During times of recession it is absolutely necessary for the government to enact and enforce the expansionary economic policies and fiscal and monetary policy, in order to negate the long-term effects of a recession.

One form of expansionary policy is the macroeconomic policy. This policy attempts to increase and encourage economic growth. The fiscal policy is one way in which the government attempts to do this. With this policy engaged, the federal government attempts to make vital changes to decrease taxes and redirect government spending. This policy is intentional in its efforts to affect the level of output, prices and employment. Some consider this policy to be restrictive with limited benefits, however, many regard it as valuable in the stabilization of economic activity and spending. Fiscal policy also takes the form of tax cuts, rebates and an increase in government spending (Amacher & Pate, 2012). With the fiscal policy in place, the government attempts to increase cumulative expenditure in order to encourage higher wages and increased production.  This policy has the ability to positively affect demand, GPD, and employment.

During the time of the Great Depression, the classical model was challenged because this was a prolonged period of high unemployment. In the General Theory, Keynes attacked the model. It was pointed out that there were errors in the model as well as offering a different model that was unlike the business cycle theorists model (Auerbach, 2012). During times of extended depression, Keynes pointed out that the classical model was not very useful. The new proposed theory looked to explain activity and recommend policies to improve economic conditions during these particular trying times (Amacher & Pate, 2012). At times, the fiscal policy raises government spending in an attempt to reduce taxes. The aim is to create a balance so that the national income has the ability to generate an increase in employment and price steadiness (Amacher & Pate,