Which term best describes an economic policy that encourages government spending during a downturn?

The term that best describes an economic policy encouraging government spending during a downturn is expansionary policy. This type of policy is utilized to stimulate economic growth, particularly during periods of recession or economic slowdown. Governments implement expansionary policies by increasing public expenditures and often, simultaneously, lowering taxes. The goal is to enhance consumer demand and spur economic activity, effectively working to mitigate the adverse impacts of a downturn.

By injecting money into the economy through spending on infrastructure, public services, or financial support programs, the government aims to create jobs and boost consumer confidence. This increased activity can lead to higher production levels, which may encourage businesses to hire more workers and invest in expansion, fostering a cycle of growth that can help recover the economy from recession.

In contrast, contractionary policy is focused on reducing government spending and increasing taxes to slow down an overheating economy, while privatization policy revolves around transferring ownership of state-owned enterprises to private entities. Regulatory policy, on the other hand, involves government rules and laws aimed at controlling and managing economic activities but does not specifically refer to spending strategies during an economic downturn.