What is the difference between expansionary fiscal policy and contractionary fiscal policy quizlet?
What is the difference between expansionary fiscal policy and contractionary fiscal policy quizlet?
Expansionary fiscal policy is when the government lowers taxes or raises government spending. Contractionary fiscal policy is the opposite – when the government raises taxes or lowers government spending.
What are the two components of expansionary and contractionary fiscal policy?
Expansionary policy involves an increase in government spending, a reduction in taxes, or a combination of the two. It leads to a right-ward shift in the aggregate demand curve. Contractionary policy involves a decrease in government spending, an increase in taxes, or a combination of the two.
What are the two goals of fiscal policy?
The usual goals of both fiscal and monetary policy are to achieve or maintain full employment, to achieve or maintain a high rate of economic growth, and to stabilize prices and wages.
What is the goal of expansionary fiscal policy?
The goal of expansionary fiscal policy is to reduce unemployment. Therefore the tools would be an increase in government spending and/or a decrease in taxes. This would shift the AD curve to the right increasing real GDP and decreasing unemployment, but it may also cause some inflation.
What are the 3 goals of fiscal policy?
The three major goals of fiscal policy and signs of a healthy economy include inflation rate, full employment and economic growth as measured by the gross domestic product (GDP).
What is the goal of an expansionary fiscal policy?
Expansionary policy seeks to stimulate an economy by boosting demand through monetary and fiscal stimulus. Expansionary policy is intended to prevent or moderate economic downturns and recessions.
What are expansionary policies?
Updated Aug 29, 2019. Expansionary policy is a form of macroeconomic policy that seeks to encourage economic growth. Expansionary policy can consist of either monetary policy or fiscal policy (or a combination of the two).
What are the types of fiscal policy?
There are two main types of fiscal policy: expansionary and contractionary. Expansionary fiscal policy, designed to stimulate the economy, is most often used during a recession, times of high unemployment or other low periods of the business cycle.
What are examples of fiscal policy?
Some examples of fiscal policy are the following: Raise or Lower Taxes Increase VAT (aggregate sales tax) Increase export aliquots Distribute resources among the different levels of government (Nation, Province, Municipalities) Apply import restrictions
What is contraction fiscal policy?
Contractionary Fiscal Policy . Contractionary fiscal policy is a form of fiscal policy that involves increasing taxes, decreasing government expenditures or both in order to fight inflationary pressures. Due to an increase in taxes, households have less disposal income to spend.