What is fiscal policy? Who conducts it (specifically who)? Suppose the administration in Washington decided to move the AD curve to the left. Why would they do this? How could they do this? What are lags and what effect will they have on the decision?
Fiscal policy involves varying govt expenditure and revenue to achieve desired objectives like growth, employment etc. Govt conducts it. In usa treasury dept conducts it. In other countries finance dept conducts it.
They would move it left to contain inflation. They could do this by reducing govt expenditure and increasing taxes and tax rates. The lags are delays in knowing and finding the impact of fiscal policy. The effect they will have on the decision is that govt can not decide to act at right time to achieve goals.
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