Issues with Marco-Policy Implementation

B. Compare and contrast expansionary and contractionary fiscal policies. An expansionary fiscal policy is developed to stimulate the economy, and this sort of a policy usually involves increased governmental spending, tax reductions, or both. The idea underlying an expansionary fiscal policy is to increase the enhance demand.

A concretionary fiscal policy is produced to slow down the economy, and such a policy typically involves decreased governmental spending, tax increases, or both. The idea underlying an expansionary fiscal policy is to enhance the decrease demand. Explain the roles of consumption, savings, and investment in the macro economy. A budget deficit can lead to interest rate increases that would have unfavorable impacts on investment.

Conversely, if deficit spending stimulated consumption, investment might be increased. A budget deficit normally sparks inflation as soon as the economy is performing relatively well, but almost certainly usually do not do so inside a recessionary period. A budget deficit in relatively good times could have adverse benefits on investment and inflation, which in turn could affect unemployment adversely.

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