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What is Fiscal Policy?
The use of government spending and taxation to influence the economy
What are the main goals of the fiscal policy?
To keep unemployment low and grow the economy
What is expansionary policy?
When the government increases output into the economy to keep unemployment low.
How does the government increase the input into the economy?
By lowering taxes and raising spending
What is contractionary policy?
When the government decreases output into the economy to fight inflation
How does the government decrease output into the economy?
By raising taxes and lowering spending
