5. Fiscal Policy
Respond to the following four questions in a minimum of 175 words each question
1. Describe the two schools of thought in keeping the economy on a long-term growth path, (chapters 22 and 24 beginning on page 521.). (175 words)
2. Explain fiscal and monetary policies. (175 words)
3. Compare and contrast expansionary and contractionary fiscal policy. (175 words)
As you will discover this week, the primary goal of expansionary fiscal policy is to increase real gross domestic product (GDP). One way that the government can accomplish this is to reduce taxes. Another way would be for the government to increase purchases. When government purchases are increased, the amount of the increase in aggregate demand primarily depends on the size of the government spending multiplier.
4. How is this multiplier calculated?
5. What is the meaning of MPC and MPS?