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Questions and Answers
What is the primary purpose of fiscal policy?
What does a 'Balanced' fiscal policy signify?
Which type of fiscal policy involves government spending exceeding taxation?
How does fiscal policy aim to achieve full employment?
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What is the key economic concept influenced by fiscal policy to achieve price stability?
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What is the main objective of fiscal policy?
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In which type of fiscal policy does government spending exceed taxation?
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What is a characteristic of contractionary fiscal policy?
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How does fiscal policy impact aggregate demand?
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Which situation would likely lead to the use of expansionary fiscal policy?
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Study Notes
Fiscal Policy
- Fiscal policy is the prime lever of economic stabilization policy, aiming to achieve higher economic growth, full employment, and price stability.
- It influences aggregate demand in the economy to achieve these goals.
Types of Fiscal Policy
- Balanced Fiscal Policy: Government spending (G) is equal to taxation (T), i.e., G = T.
- Expansionary Fiscal Policy: Government spending (G) is greater than taxation (T), i.e., G > T. This type of policy is used to stimulate economic growth.
- Contractionary Fiscal Policy: Government spending (G) is less than taxation (T), i.e., G < T. This type of policy is used to reduce aggregate demand and combat inflation.
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Description
Test your knowledge on fiscal policy, the prime lever of economic stabilization influencing aggregate demand, economic growth, full employment, and price stability through government spending and taxation manipulation.
