Fiscal policy can be described as changes in government spending and taxes to achieve macroeconomic policy objectives.
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Who is responsible for fiscal​ policy?
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The federal government controls fiscal policy.
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Some spending and taxes increase or decrease with the business cycle. This event often has an effect on the economy that is similar to fiscal policy and is called
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automatic stabilizers
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What is an expansionary fiscal​ policy?
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Expansionary fiscal policy includes increasing government spending and decreasing taxes to increase aggregate demand.
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What is a contractionary fiscal​ policy?
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Contractionary fiscal policy includes decreasing government spending and increasing taxes to decrease aggregate demand.
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The term​ "crowding out" refers to a situation​ where:
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Government spending increases interest rates and decreases private investment.
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Why might cutting government spending as a fiscal policy be a more difficult policy than the use of monetary policy to slow down an economy experiencing​ inflation?
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The legislative process experiences longer delays than monetary policy.
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