Macroeconomic Policy: Overview Expansionary versus Contractionary A macroeconomic policy that increases the aggregate demand is considered to be an expansionary (fiscal or monetary) policy. It is often applied when the economy is in recession (ow growth and low inflation and high unemploymentMacroeconomic Policy: Overview • Expansionary versus Contractionary: – A macroeconomic policy that increases the aggregate demand is considered to be an expansionary (fiscal or monetary) policy. It is often applied when the economy is in recession (low growth and low inflation and high unemployment)