Question

agree or disagree 75+ words

Fiscal policy affects aggregate demand through changes in government spending and taxation. When the government decides on the goods and services it purchases, the transfer payments it distributes, or the taxes it collects, it is engaging in fiscal policy. The primary economic impact of any change in the government budget is felt by particular groups—a tax cut for families with children, for example, raises their disposable income. Discussions of fiscal policy, however, generally focus on the effect of changes in the government budget on the overall economy. Although changes in taxes or spending that are “revenue neutral” may be construed as fiscal policy—and may affect the aggregate level of output by changing the incentives that firms or individuals face—the term “fiscal policy” is usually used to describe the effect on the aggregate economy of the overall levels of spending and taxation, and more particularly, the gap between them.

Answer 1

Agree

The government fiscal policy, though, not as effective and immediate working as the monetary policy is used to influence the output and demand in the economy. When the taxes are higher and government spending is less it can control inflation and excess demand in the economy and when the demand is subdued it can be used to increases the demand and output.

when we talk about the fiscal policy we usually refers to the influence the government can create to manage the demand and output. one major problem with the use of fiscal policy is with the crowding out which comes with it. If the demand is low and interest rate is close to zero government expenditure makes much more sense than using it at the time when the demand is rising or when the investment is just picking up.