32 Fiscal Policy

Photo shows an earth moving machine near a board which reads, “Project funded by American recovery and reinvestment act”.

Can fiscal stimulus end a recession?

Chapter Checklist

When you have completed your study of this chapter, you will be able to

  1. 1 Describe the federal budget, the process that creates it, and a challenge that it faces.

  2. 2 Explain how fiscal stimulus is used to fight a recession.

  3. 3 Explain the supply-side effects of fiscal policy on employment, ­potential GDP, and the economic growth rate.

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