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can affect employment and pricing but not GDP levels. A. The fiscal policies of the federal government are meant to influence demand.
What specifically is wrong with an expansionary fiscal policy?
Expansive fiscal policy, on the other hand, can result in higher interest rates, growing trade deficits, and rising inflation if it is applied during good economic expansions. These unfavorable repercussions of an expansive fiscal policy frequently offset their stimulative effects in part.
How does fiscal expansion affect the debt and deficit?
Governments have the option to increase spending and borrow money as part of a targeted fiscal policy. When fiscal policy is expansionary, budget deficits rise, but when it is contractionary, deficits fall.
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In extreme cases, debt problems may be so severe that an expansionary fiscal policy would actual growth and bring about an economic collapse.
Fiscal policy – what is it?
The phrase "fiscal policy" refers to what the administration utilizes spending and taxing to positively impact the economy. Governments frequently utilize fiscal policy to promote strong, long-term prosperity and to reduce poverty. There are three types of tax stimulus. They are neutral, economic growth, and contractionary, respectively.
Please provide some examples of fiscal policy.
In order to improve the economy, for instance, administrations can lower taxes and increase expenditure; generally, however, they invest in social programming and infrastructure improvements that create revenue and jobs. Another option is for a government to decide to reduce spending while increasing taxes if the firm is profit.
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