Fiscal Policy Flashcards
1
Q
What is fiscal policy
A
The manipulation of government spending, taxation and gov borrowing to influence economic activity
2
Q
What are the two types of fiscal policies
A
Expansionary and contractionary
3
Q
What is expansionary fiscal policy
A
When the gov is trying to positively stimulate economic activity
4
Q
How does expansionary fiscal policy take place
A
Cutting taxes (income and corporation), raising gov spending, increasing the budget deficit
5
Q
What is contractionary fiscal policy
A
When the government is trying to constrain aggregate demand, reduce debt or control inflation
6
Q
How does contractionary fiscal policy take place
A
By increasing taxes, cutting government spending and cutting the budget deficit
