More about fiscal policy:
- contractionary fiscal policy:
- laws that reduce inflation, decrease GDP (close inflationary gap)
- decrease government spending
- tax increases
- combination of the two
- expansionary fiscal policy (the gas):
- laws that reduce unemployment, an increase GDP (close recessionary gap)
- increase government spending
- combination of the two
- automatic of built in stabilizers:
- anything that increases the governments budget deficit during a recession & increases its budget surplus during inflation without requiring explicit action from policy makers
- transfer payments:
- welfare checks
- food stamps
- unemployment check
- corporate dividends
- social security
- veterans benefits
Hello Patricia! I was going through your blog and found it very interesting that you posted multiple videos and pictures that further explain your notes per every post. Especially the videos under your last post about fiscal policy really helped me differentiate the difference between expansionary and contractionary policies. Initially, I was having trouble distinguishing between the two; however, upon watching the two videos I now understand that Contractionary policies are enacted when the economy is facing inflation. Meaning, the government spendings decreases and taxation increases. While expansionary policies come into play when the economy encounters a recession which causes the government spending to increase and taxation to decrease.
ReplyDeleteThe videos you provided were really useful. I also found very helpful how you listed the different types of transfer payments because when determining whether a policy is expansionary or contractionary transfer payments help to decide which policy has taken place.I used to have trouble understanding what would and wouldn't account for transfer payments but after viewing your blog, it is now easier for me to point them out and determine based on increase or decrease if the fiscal policy taking place is expansionary or contractionary.
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