32.2 Fiscal Stimulus
MyEconLab Concept Video
We’ve described the federal budget and the institutions that make fiscal policy, and now we’re going to study the effects of fiscal policy. We begin by exploring its effects on aggregate demand.
Fiscal Policy and Aggregate Demand
A number of different fiscal policy actions might be used in an attempt to stimulate aggregate demand. Government expenditure on goods and services or government transfer payments might be increased and taxes might be cut. And these changes might occur as an automatic response to the state of the economy or as a result of new spending or tax decisions by Congress.
A fiscal policy action that is triggered by the state of the economy is called an automatic fiscal policy
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