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2.6, Macroeconomic policy - Coggle Diagram

- - - - A tax levied directly on individuals or companies e.g income tax
    - - A tax levied on goods and services e.g VAT
  - - - Automatic Stabilisers
        
        In recession=increase benefits
    - - Discretionary
        
        Government might actively spend money or reduce taxes to create an injection into the economy
  - - - Time lags 🡪 when the government makes spending and taxation decisions, there is a time lag before the effects are seen
      - Trade-off 🡪 if the government tries to influence AD it cannot achieve all macroeconomic objectives simultaneously
      - E.g. A rise in AD leads to a fall in unemployment but a rise in inflation
      - Imperfect data 🡪 the government cannot possibly know every precise aspect of the economy so its decisions may lead to government failure