Key concepts and skills from this topic:

• Goal of Fiscal Policy influencing Macroeconomic Goals. 

• Impact of contractionary and expansionary fiscal policies on aggregate demand, real GDP, inflation and employment. 

• Operation and calculation of the spending multiplier effect 

• Supply-side fiscal policy impact on the macroeconomic goals.

• Impact of budget deficit and surpluses on government debt levels.

• Effectiveness of fiscal policy as a tool for achieving macroeconomic goals.

Fiscal Policy

Fiscal policy: the use of government spending and taxation to influence the nation's economic growth, employment and price level.

Expansionary Fiscal Policy action occurs when the government increases spending and/or lowers tax rates to boost AD.

Expansionary Fiscal Policy

Contractionary Fiscal Policy action occurs when the government decreases spending and/or raises tax rates to decrease AD.

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ContractionaryFiscal Policy