Please enable JavaScript.
Coggle requires JavaScript to display documents.
Role of AD - Coggle Diagram
Role of AD
Fiscal Policy
-
Gov spend on public goods and merit goods, as well as welfare payments.
-
-
Automatic are policies which offset fluctuations in the economy e.g. payments and taxes. Are triggered without government intervention.
Gov may use expansionary fiscal policy during periods of economic decline - increasing spending on transfer payments or boosting AD, or by reducing taxes.
During economic growth, Gov may use contractionary policy by decreasing expenditure on purchases and transfer payments - tax may increase and budget deficit decreases.
Multiplier
-
Leads to injection of more income into circular flow, leading to economic growth.
more jobs created, higher average income, more spending and eventually more income created.
-
-
-