Economics- Fiscal Policy

Economics- Fiscal Policy - Kelly Higgins Fiscal Policy...

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Kelly Higgins Fiscal Policy refers to the governments way of trying to influence the direction of the economy through taxation and government spending. It is also the effect of the budget outcome due to economic activity. It is contrasted with another type of economic policy, monetary policy. Monetary policy attempts to stabilize the economy through interest rates and the supply of money. Changes in the level and composition of the taxation and spending in the government can affect: Aggregate demand (Total output of goods and services demanded in the economy) The pattern of resource allocation (assigning available resources in the economy) The distribution of income Three stances in fiscal policy: Neutral - Neutral is a balanced budget. Government spending is fully funded by tax revenue and there is a neutral effect on the economy. (G=T) (Government Spending = Tax Revenue) Expansionary - Expansionary fiscal policy is an increase in government spending. This can be caused by a rise in government spending or a
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Economics- Fiscal Policy - Kelly Higgins Fiscal Policy...

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