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Fiscal Policy

Fiscal policy includes all policies that involve either government spending or taxation in order to affect the economy - typically trying to improve GDP. The government can either engage in expansionary fiscal policy characterized by increased government spending and/or tax reductions or contractionary fiscal policy characterized by decreased government spending and/or tax increases. This branch of economics focuses on the relationship between the government and the economy, and how the government’s decisions affect different members of the economy.

Both expansionary and contractionary policies have there benefits and costs within the macro economy. Expansionary policy will typically help increase the output of the economy, but increase government debt. On the other hand, contractionary fiscal policy will decrease government debt, but may come at the cost of the economy's output. The extent of the effect of fiscal policies is debated and is not always clear. The neoclassical perspective views fiscal policy as ineffectual in the long run whereas the keynsian view finds fiscal policy as often necessary to stimulate the economy and drive it out of a recession. Keynsian economics often uses the multiplier effect as a reason that effective fiscal policy can indeed provide long run effects on the economy. 

Zakat and Fiscal System

Does Zakat have any role to play in the fiscal system of Muslim countries or should it be free from government interference?

Policy Options For The Economy

What are the two policy options used to influence the economy? In the current economy, we observe the following. Inflation rate 9.20 Interest rate 10.60 Growth in Real GDP -0.51 Unemployment Rate 6.80 a. Determine the monetary policy action and its consequences b. Determine the fiscal policy actions and i

Setting Fiscal policy

Using what you have learned in this unit, choose a FISCAL policy that you would recommend to help an economy that is in a recession. You should not choose a monetary policy (i.e. interest rate manipulation, selling of bonds, or printing of money). Explain how your policy would help increase aggregate demand. That is, does it

Expansionary Fiscal Policy: AD and AS Curves

During a recession the government usually increases government spending and/or decreases taxes (expansionary fiscal policy). Bush lowered taxes in the 2001 recession and his tax cuts continue. Obama has increased government spending through his stimulus packages. What effect should these expansionary policies have on the AD and

Contractionary Fiscal Policy

Answer the following questions in your response: What is a contractionary fiscal policy? When would an economy ever pursue a contractionary fiscal policy? Can you find any examples for when this policy was used in our economy and why? Use outside references to support your points.

Economics: Keynesian Solutions

1. What is the Keynesian solution to a recession or depression? How does the Keynesian multiplier work? 2. We are slowly coming out of a recession now. What kind of policies were/are proposed to help get us out of this recession? Do these sound like Keynesian polices or Classical ones? Why?

Terminology: Fiscal Cliff and Obama Care

Give two terms that you have heard in the mass media, political arena, or in any other venue. Provide an explanation of why these two terms were designed to convey a certain point of view and discuss the effect they have on the reader. I chose the terms "Fiscal Cliff" and "Obama Care."

Fiscal Policy Implementation

What kind of fiscal policy did the Congress enacted during the after effects of Hurricane Katrina? What kind of policy are they working on now?

Recession and Fiscal Policies

1. How is a recession defined? Is the U.S. currently in a recession? Explain. 2. Assume you are an advisor to President Obama. What fiscal policies would you put in place?

Quantitative Easing

Do you think the Federal Reserve should continue quantitative easing to stimulate the economy? Why can't countries like Greece or Spain use quantitative easing as a means to stimulate their economies?

Reducing Aggregate Demand to fight inflation.

Suppose the Fed wanted to reduce aggregate demand (to fight inflation) and the president wanted to increase total expenditure (to fight unemployment). What kind of action would each take? NOTE: There are 2 separate entities here with 2 separate goals. You need to tell me what policy would be initiated by EACH entity separately.

Fiscal Policy and the Economic Downturn

I am looking to find the parties responsible for crafting reparation policies for the current U.S. Economic crisis. How have these people changed monetary policy, fiscal policy and laws that govern businesses since the collapse of the economy.

the short-run and long-run impact of the Federal fiscal policy

What has been, and what will be, the short-run and long-run impact of the Federal fiscal policy that has been followed in the past few years? To answer this question, you need to look back at the last 10 years of fiscal policy, and pick one (ONLY 1) policy - I repeat, only 1! Initial responses with more than one policy will

Fiscal Policy in the U.S.

Briefly discuss the highlights of fiscal policy's evolution in the United States over the last century.

Fiscal Policy Timing

How do the fiscal policy changes play a role in the theory of political business cycles? Is this a valid role for fiscal policy?

State rejection of federal assistance to uphold beliefs

There is no Constitutional requirement that individual states must accept monies offered by the federal government to support needs affecting their citizens. However, given the challenging budgetary and fiscal realities that most states face today, the acceptance of federal aid is something that is a given, and is rarely turned

macroeconomics questions for monetary policy

Are there any lags that are associated with fiscal policy that are not present with monetary policy? Is it possible that the levels of unemployment today are the result of government policies?

Macroeconomic Policy Lessons from the Financial Crisis

Read the article "Getting Back on Track: Macroeconomic Policy Lessons from the Financial Crisis" (which can be found at and answer the following questions: a. What was the Great Moderation? When did it begin and end? According to Taylor, why did it end? b.

The current macroeconomic status in America is characterized.

What is the "current macroeconomic situation" in the U.S. (e.g. is the U.S. economy currently concerned about unemployment, inflation, recession, etc.)? What fiscal policies and monetary policies would be appropriate at this time? Write your individual answers to the questions listed above together in essay format, using corr

Fiscal Federalism

U8Q8BM. The central economic problem of fiscal federalism is: a. the division of taxing and expenditure functions among different levels government. b. the choice of the collective choice rule for central governments only. c. the level of public goods to be provided by a central government only. to achieve an equit

Fiscal policy calculations

1. Suppose the government decides to increase taxes by $30 billion in order to increase Social Security benefits by the same amount. How will this combined tax-transfer policy affect Aggregate Demand (AD) at current prices? 2.If the AD shortfall is $800 billion and the Marginal Propensity to Consume (MPC) is 0.8, (a) How la

Inflation (Sample Questions)

Questions: 1.Explain the various types of inflation and its consequences. Suppose you borrow $1000 from a bank at 5% interest for one year and the inflation rate that year is 10%. Was this loan advantageous to you or to the bank? 2.Explain two limitations of the discretionary fiscal policy. 3.Describe the difference

Does an active fiscal policy help or hinder long run growth in the economy? The textbook presents arguments that can be used to support both sides in this debate. How do they compare? List reasons why an active fiscal policy helps the long run growth of the economy. List reasons why an active fiscal policy hinders the long run growth of the economy. Should the US use fiscal policy to encourage long run growth of the economy? Why?

Does an active fiscal policy help or hinder long run growth in the economy? The textbook presents arguments that can be used to support both sides in this debate. How do they compare? List reasons why an active fiscal policy helps the long run growth of the economy. List reasons why an active fiscal policy hinders the long run g

Determine a purchase price for Peets Coffee.

Research if Peets Coffee would be a good target for an acquisition by Starbucks. Determine the value of Peets coffee both present and future valuation. Determine a good purchase price for the company. Investor info is located at, click on company info and all investor links are located on the left side.