Expansionary fiscal policy is helpful to an economy because it helps to increase the amount of money that people have. By doing this, it helps to increase aggregate demand. This causes the economy to improve, which means that more people have jobs and a better standard of living.
Expansionary fiscal policy can consist of either or both of two things. The government can lower taxes and/or it can increase its spending. In both cases, this puts more money in the hands of the consumers. If taxes are lowered, people do not have to give as much money to the government and they have more to spend. If the government spends more, it is giving more money to people in exchange for work (such as building roads or teaching school). If people have more money in their hands, they will be able to buy more things. This will increase aggregate demand in the economy.
When aggregate demand rises, the economy improves. As there is more demand for goods and services, companies have to hire more people so as to produce the things that the consumers want. When companies do this, more people have jobs and the overall standard of living for people in the economy rises. For these reasons, expansionary fiscal policy can be beneficial to an economy.
No comments:
Post a Comment