Question

When it comes to government budget, fiscal policy works through the shift of aggregate demand and is most often used to tackle unemployment issues. The textbook will help you to understand the fundamental of fiscal policy. What is the difference between contractionary and expansionary fiscal policy? Which do you think is more appropriate today? Explain your answer. Have you even experienced a depression? Have you experienced a recession? How did it affect you?

Answer 1

A contractionary fiscal is when the government reduces the government spending and increase the taxes in the economy, an expansionary fiscal policy is when the government increases the spending and decreases the tax.

today the economy is working at a booming phase and unemployment is at all time low. inflation is rising and the Fed is increasing the interest rate in the economy. At this time it will be more appropriate for the government to adopt a contarctionary fiscal policy and manage the rising price.

yes, I have experienced 2008 sub prime crisis that was a recession. it decrease the demand and reduced the wages, making it difficult for the people to find a new job.

answered by: anonymous