3.2.4 Macroeconomic policy Flashcards Preview

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Flashcards in 3.2.4 Macroeconomic policy Deck (4)
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1
Q

What does fiscal policy involve?

A

Government spending and taxation.

2
Q

What scenario is reflationary fiscal policy likely to be used and why?

A

During a recession or a negative output gap, using reflationary fiscal policy will increase economic growth and reduce unemployment but also increase inflation and worsen the balance of payments.

3
Q

What is reflationary fiscal policy?

A

Reflationary fiscal policy involves boosting aggregate demand by increasing government spending and/or reducing taxes.

4
Q

What is deflationary fiscal policy?

A

Deflationary fiscal policy involves reducing aggregate demand by reducing government spending and or increasing taxation.