Fiscal policy

Fiscal Policy

Fiscal policy: the taxation and spending decisions of a government

Reflationary fiscal policy: policy measures designed to increase AD e.g. rises in government spending/ cut in taxes

Deflationary fiscal policy: policy measures designed to reduce AD e.g. cuts in government spending/ rise in taxes 

Discretionary fiscal policy: deliberate changes in government spending and taxation designed to influence AD

Automatic stabilisers: forms of government spending and taxtaion that change automatically to offset fluctuations in economic activity

Economic cycle: the tendency for economic activity to fluctuate outside its trend growth rate, moving from a…