Please enable JavaScript.

Coggle requires JavaScript to display documents.

Demand Side Policies, The Government, Definitions - Coggle Diagram

- - - - Government spending increases
      - Taxes decreases
      - Aggregate Demand increases
      - Closes a recessionary (deflationary) gap by increasing AD
      - Lowers unemployment and boosts economic growth
      - May cause inflation if economy is close to or at full-employment of resources
      - Advocated by keynesian economists
    - - Government spending decreases
      - Taxes increases
      - Aggregate Demand decreases
      - Closes an inflationary gap by decreasing AD
      - Lowers rate of inflation
      - May increase unemployment and slow down economic growth
    - - Direct impact on aggregate demand
      - Can target specific sectors of the economy
      - Effective at promoting economic activity in a recession
    - - Time lags
      - Political constraints
      - Crowding out
      - Inability to deal with supply side causes of instability