What is fiscal policy?

Fiscal policy refers to the use of government spending and tax policies to influence economic conditions, especially macroeconomic conditions. These include aggregate demand for goods and services, employment, inflation, and economic growth.

What is discretionary fiscal policy?

The government has two types of discretionary fiscal policy options—expansionary and contractionary. Each type of fiscal policy is used during different phases of the economic cycle to stop or slow recessions and booms. Expansionary fiscal policy involves the measures taken by the government to put more money back into the economy.

What would a loose fiscal policy look like?

a loose/tight fiscal policy A loose fiscal policy would give the economy a badly needed short-term boost, but would fail to deal with a variety of deeper problems. Both fiscal policy, thanks to government deficit spending, and monetary policy, with zero interest rates, are accommodative by historical standards.

What is Keynesian fiscal policy?

Fiscal policy is based on the theories of the British economist John Maynard Keynes, whose Keynesian economics theorised that government changes in the levels of taxation and government spending influence aggregate demand and the level of economic activity.