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Sagot :
When government spending is increased, the amount of the increase in aggregate demand primarily depends on the size of the multiplier. Government expenditure and taxation are used in fiscal policy to have an impact on the economy. Fiscal policy is often used by governments to encourage rapid, long-lasting economic expansion and to lower poverty.
What is an example of government fiscal policy?
A fiscal policy is one in which the government uses taxation, public expenditure, and public borrowing as tools to accomplish specific economic policy goals. In a nutshell, it is the practice of using taxes and expenditures by the government to generate sustainable growth.
Tax reductions and greater public spending are the two main manifestations of expansionary fiscal policy. Both of these measures aim to boost overall demand while reducing budget surpluses or adding to deficits. Three different types of fiscal policy exist. These three types of policy are neutral, expansionary, and contractionary.
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