Under an expansionary taxation policy, the government tries to stimulate economic growth by
a. increasing taxes.
b. reducing taxes.
c. increasing spending.
d. reducing spending.

B. Reducing taxes

Expansionary policies seek to encourage economic growth.  Governments pursuing an expansionary policy will cut taxes in order to stimulate investment and production by businesses and economic activity by consumers.  The idea is that by putting more money back into the pockets of taxpayers (whether corporations or individuals), they will respond by using the dollars not paid in taxes in ways that will generate greater levels of economic activity in the country.  

In December 2017, the US Congress (led by Republicans) passed a major tax cut package, which reduced tax rates on corporations from 35% to 21%, as well as lowering individual income tax rates.  It remains to be seen, however, how well the tax cut policy will work to improve overall economic well-being in America.  Much of the benefit goes to stockholders and investors, more so than to workers.  Market Mogul reported in April, 2018, that while Walmart announced it would spend $700 million on job creation and higher wages, that amount is very small compared to the $4 billion that Walmart plans to use to increase its stock value and benefit its investors, shareholders, and executives.  So a major argument continues to be debated, as to which sectors of the economy are helped by an expansionary tax policy.