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Unformatted text preview: economy it will increase investment which in turn may lead to an increase in aggregate demand. This is an effective way to combat economic problems such as unemployment and recession. On the other hand if a government wants to eliminate recession it will have to pursue a contractionary demand side policy. This policy will increase taxation thus decreasing the citizens disposable income thus in turn reducing consumption which will reduce aggregate demand which will in turn reduce inflation. On the other hand it will decrease government spending thus decreasing investment which will again reduce aggregate demand and thus in turn reduce inflation....
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This note was uploaded on 03/10/2011 for the course ECON 101 taught by Professor Duc during the Spring '05 term at Linfield.
- Spring '05
- Fiscal Policy