How can the government use Demand side policies to boost economic growth

Demand side policies are used in times of recession or economic stagnation, to boost economic activity.

The idea behind this is to increase Agregate demand (AD) by increasing its components (Consumption, Investment, Net exports and Government spending), which will then increase real GDP, and perhaps the price level depending where the economy lies. This can be shown on a diagram (explain and draw diagram)

The two main policies are expansaionary fiscal and monetary policies:

Fiscal policy - reduce taxes and increase government spenidng. Both will increase consumer expenditure and raise AD as it is the largest compoent. It will also raise investment for example by government spending which will further boost AD.

Monetary policy works by reducing interest rates which will reduce the incentive to save and increase consumer spending causing a rise in AD.