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CECN 204 - Short Q&A Exam

CECN 204 - Short Q&A Exam -...

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CHAPTER 11: FISCAL POLICY, DEFICIT, SURPLUS, AND DEBT Question#1 – Explain what are the tools of fiscal policy? Explain how an expansionary or  contractionary fiscal policy can be used to control recession? Use recent Canadian fiscal  policy as an example. The two main components of fiscal policy are government expenditure (spending) and taxation.  Changes in the level and composition of taxation and government spending can impact  economic variables such as aggregate demand (level of economic activity), resource allocation,  and distribution of income. Some examples of government spending would be healthcare and  transfer payments such are welfare benefits. Fiscal policy is the overall effect of the government budget outcome on economics activity. An  expansionary fiscal policy is when government spending is increased and tax decreased. During  a recession unemployment rate in Canada increases which decreases aggregate demand and  the level of economic activity. Therefore, the Canadian government introduced an expansionary 
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