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fiscal policy - Coggle Diagram

- - - - fixes: 1) Better training programs. 2) Wage subsidies for displaced workers.. 3) The government should just hire people. 4) Congress and the Fed should push for full employment faster.
        
        effectivess: A very low a rate of unemployment, however, can have negative consequences, such as inflation and reduced productivity. When the labor market reaches a point where each additional job added does not create enough productivity to cover its cost, then an output gap, or slack, happens.
        
        benefits: lower the poverty rates. And unemployment benefit programs encourage people to take socially beneficial jobs, despite some risk of future layoffs, which improves the economy.
        
        drawbacks: unemployment, however, can have negative consequences, such as inflation and reduced productivity.
  - - - fixes: governments could stabilize the business cycle and regulate economic output. During a recession, the government may employ expansionary fiscal policy by lowering tax rates to increase aggregate demand and fuel economic growth.
        
        effectivess: Fiscal policy describes changes to government spending and revenue behavior in an effort to influence the economy. By adjusting its level of spending and tax revenue, the government can affect economic outcomes by either increasing or decreasing economic activity.
        
        benefits: Understanding business cycles allows owners to make informed business decisions. By keeping a finger on the economy's pulse and paying attention to current economic projections, they can speculate when to prepare for a contraction and take advantage of the expansion.
        
        drawbacks: these fluctuations not only reduce the average aggregate consumption of the household but its impacts may differ across the individuals and across the generations
  - - - fixes: Lowering taxes raises disposable income, allowing the consumer to spend additional sums, thereby increasing GNP. Reducing taxes thus pushes out the aggregate demand curve as consumers demand more goods and services with their higher disposable incomes
        
        effectiveness:an increase in government spending will shift the demand curve to the right. A reduction in taxes will leave more disposable income and cause consumption and savings to increase, also shifting the aggregate demand curve to the right.
        
        benefits: The plan could increase employment by up to 30,000 people
        
        drawbacks:Lower tax income can prevent police officers, firefighters, public-school teachers, park maintenance crews and a host of other government employees from increasing their personal income as government salaries increase more slowly, freeze or even decrease.