What determines which type of fiscal policy is used and when?

The type of fiscal policy used—expansionary or contractionary—is determined by the current state of the economy. During a recession or economic downturn, governments typically implement expansionary fiscal policies, such as increased spending or tax cuts, to stimulate demand. Conversely, in times of economic growth or inflation, contractionary policies, such as reducing government spending or raising taxes, may be employed to cool down the economy. Policymakers assess economic indicators, such as GDP growth, unemployment rates, and inflation, to guide their fiscal policy decisions.