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Fiscal Policy, Demand-Side Policy (AD) - Coggle Diagram

- - - - ↑G ↓T to ↑AD/↑Total spending
        
        ↓ Direct Tax = ↑ disposable Y
      - Purpose
        
        Stimulate econ
        
        ↓ unemployment
    - - ↓G ↑T to ↓AD/↓Total spending
      - Purpose
        
        To control inflation
  - - - Deliberate action by gov
        
        changes in tax rate
      - Expansionary & Contractionary
    - - Changes in G&T w/o gov action
      - ↓ AD fluctuations
      - eg. ↑ NY ↑ growth
        
        ↑ T (rate constant)
        
        ↓ G - ↓ unemployment benefits
        
        NY changes gradually, not steep
      - Smoothen GDP fluctuations w/o gov action
  - - - T > G
    - - G > T
      - Gov borrows
        
        internationally
        
        from bonds
        
        from bank
      - ↓ econ activity, ↑ G
      - 2 Types
        
        Cyclical Deficit
        
        due to auto stabilizers
        
        ↓ concern
        
        Structural Deficit
        
        G too high
        
        ↑ concern
        
        ↑ G when T = 0
  - - - T&G changes take long to implement, work thru econ & show effect
    - - Lim funds for
        gov during low growth
    - - Multiplier value
        not easy determine
      - eg. Multiplier = 2
        injection ↑ by $2m
        NY ↑ by $4m ($2m*2)
    - - eg. ↓ unemployment
        leads to ↑ inflation