Answer: personal income tax rates.

## Explanation **Expansionary fiscal policy** refers to government actions that aim to stimulate economic growth by increasing aggregate demand. This typically involves: 1. **Increasing government spending** 2. **Decreasing taxes** Let's analyze each option: **A. public spending.** - A cut in public spending is actually **contractionary fiscal policy**, as it reduces government expenditure and decreases aggregate demand. **B. personal income tax rates.** - A cut in personal income tax rates is **expansionary fiscal policy**. When people pay less in taxes, they have more disposable income to spend, which increases consumption and aggregate demand. **C. reserve requirements for banks.** - This is **monetary policy**, not fiscal policy. Reserve requirements are set by central banks (like the Federal Reserve) and affect how much money banks can lend. A cut in reserve requirements would be expansionary monetary policy, not fiscal policy. **Key Distinctions:** - **Fiscal Policy**: Government spending and taxation decisions made by the legislative and executive branches. - **Monetary Policy**: Actions by central banks to control money supply and interest rates. Therefore, only option B represents expansionary fiscal policy, as it involves tax cuts that increase disposable income and stimulate economic activity.

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