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Transcript. In previous lessons we've learned how expansionary monetary policy and expansionary fiscal policy can be used to mitigate a recession, but they don't have to be used in isolation from each other. Often there is simultaneous use of fiscal and monetary policy. Learn what happens when they are used at the same time in this video.
- 7 min
May 4, 2022 · The government uses expansionary policy during a recession, and contractionary policy during an economic boom. Monetary policy acts more directly on interest rates to affect the value of the dollar, whereas fiscal policy works at higher levels to affect consumer spending.
Feb 8, 2024 · A neutral fiscal policy refers to a strategy by which the government’s budget is designed to neither stimulate nor restrain economic growth. Objective: The objective of Expansionary Fiscal Policy is to reduce unemployment and also results in better GDP. The objective of Contractionary Fiscal Policy is to reduce inflation.
Expansionary Fiscal Policy. Definition. Contractionary fiscal policy is defined as the type of fiscal policy that works toward contracting the economy. Expansionary fiscal policy is defined as the policy that works towards promoting the consumption in the economy. It works for expansion of the economy.
An expansionary fiscal policy seeks to shift aggregate demand to AD 2 in order to close the gap. In Panel (b), the economy initially has an inflationary gap at Y 1. A contractionary fiscal policy seeks to reduce aggregate demand to AD 2 and close the gap. Now we shall look at how specific fiscal policy options work.
Expansionary fiscal policy occurs when the Congress acts to cut tax rates or increase government spending, shifting the aggregate demand curve to the right. Contractionary fiscal policy occurs when Congress raises tax rates or cuts government spending, shifting aggregate demand to the left. Figure 1 uses an aggregate demand/aggregate supply ...
Apr 22, 2024 · An example of tax cuts as expansionary fiscal policy is the Economic Stimulus Act of 2008, in which the government attempted to boost the economy by sending taxpayers $600 or $1,200 depending on ...
