Please enable JavaScript.
Coggle requires JavaScript to display documents.
Types of fiscal policy - Coggle Diagram
Types of fiscal policy
Definition
Discretionary fiscal policy involves intentional modifications to government spending and taxation.
Designed to:
Achieve full-employment
Control inflation
Encourage economic growth
Types of fiscal policy
Expansionary fiscal policy
Face recession
Increasing government spending
Decreasing taxes
Combining both
Contractionary/tight fiscal policy
Control inflation
Reducing government spending
Raising taxes
Combining both
Reduce demand-pull inflation
Fiscal policy and Demand pull inflation
Tools used:
Decrease government spending
Decreasing taxes
Combining both
Create a surplus (G - T)
Solution: contractionary policy
Policy options: G or T?
To expand the size of government
Recession
Increase Government spending
Inflation
Increase Taxes
To reduce the size of government
Recession
Decrease T
Inflation
Decrease G