Kristen Koehler Econ 104 TA Hyun Woong Park Extra Credit Fiscal policy refers to government policy that attempts to influence the direction of the economy though changes in government spending or taxes . Changes in taxation and government spending can impact the following three things , aggregate demand and the level of economic activity , the pattern of resource allocation, and the distribution of income . Fiscal policy is used by governments to influence the level of aggregate demand in the economy , in an effort to achieve economic objectives of price stability, full employment , and economic growth. As of Dec . 14 2007 Australia’s new Treasurer Wayne Swan announced that because the country was being confronted by a period of elevated inflation , he would be implementing a tight fiscal policy . In doing so, his government would aim to boost economic productivity . Swan says that the inflationary pressures did not just transpire over night . They have been developing for some time now and will take quite a while to
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