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Fiscal Policy Definitions - Macnomics

When the Economy Fails Fiscal PolicyFiscal PolicyFiscal PolicyFiscal Policy Page 1 of 4 Fiscal Policy Definitions Fiscal Policy is the use of taxes, government transfers, or government purchases of goods and services to shift the aggregate demand curve. Discretionary Fiscal Policy : government takes deliberate actions through legislation to alter spending or taxation policies Expansionary Fiscal Policy When the economy is in recession, government wants to increase AD Tax cut: increases consumers disposable income o Increases AD as long as consumers don t increase savings or spending on imports Increase in government spending: directly shifts the AD curve Contractionary Fiscal Policy When economy is suffering from inflation, government wants to decrease AD Tax increase.

Fiscal Policy Definitions Fiscal policy is the use of taxes, government transfers, or government purchases of goods and services to shift the aggregate demand curve. Discretionary Fiscal Policy: government takes deliberate actions through legislation to alter spending or taxation

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