Aggregate Demand - Government policies and Aggregate Demand - Fiscal policy

3 important questions on Aggregate Demand - Government policies and Aggregate Demand - Fiscal policy

What are the 2 fiscal stabilizers of the economy. Dow we use only one at a time or both?

  • Government spending on final goods and services and government transfers.
  • Tax policies 
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What does the government do during a unexpected recession? What is the name of the policy?

  • by increasing government spending
  • by increasing government transfers
  • and decreasing  taxes
  • By using expansionary fiscal policy
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How does expansionary fiscal policy fix an unexpected recession?

  • As government expenditure increases,
  • autonomous expenditure increases,
  • the aggregate demand increases
  • then no more recessions  
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