Government Macro Intervention

  • Created by: Jeon32666
  • Created on: 10-02-19 17:55

Fiscal policy

This policy refers to the manipulation of government spending and tax rates in order to achieve some desired macroeconomic objectives.

Expansionary Fiscal Policy

  • An increase in government spending and/or a decrease in tax rates
  • It aims to increase aggregate demand in order to increase national income and employment
  • A rise in government spending will directly increase aggregate demand, as it is a component of this.
  • A decrease in taxes will indirectly increase aggregate demand as it will increase disposable income that people have which will encourage more spending

Contractionary Fiscal Policy

Contractionary fiscal policy involves a cut in government expenditure or an increase


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