Contractionary and
Expansionary Fiscal Policy
Contractionary (The Brake)
-law that reduces inflation, decreases GDP
-closes a inflationary gap
1) Decreases Government spending
2) Tax increases
3) Combinations of the two
Expansionary fiscal policy (The GAS)
-law that reduces unemployment and increases GDP
-closes a recessionary gap
1) Increases Government spending
2) Decreases taxes on consumers
3) Combination of the two
3) Combination of the two
Automatic or Butt-in Stabilizers
-Anything that increases the government’s budget deficit during a recession and increases it’s budget surplus during inflation without requiring explicit action by policy makers.
-Anything that increases the government’s budget deficit during a recession and increases it’s budget surplus during inflation without requiring explicit action by policy makers.
Transfer Payments
-Welfare checks
-Food Stamps
-Unemployment checks
-Corporate dividends
-Social security
-Veteran’s Benefits
-Welfare checks
-Food Stamps
-Unemployment checks
-Corporate dividends
-Social security
-Veteran’s Benefits
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