In economics, fiscal policy is the use of government spending and revenue collection to influence
the economy.
Fiscal policy have two functions
1.Deal with deflation and inflation.
2.make economic fluctuations are stable
How we can use fiscal policy to deal with those problem?
Deflation is persistent decrease in the general price level of goods and services,which means the
AD is lower, so in order to increase AD, they government will decrease the tax, and increase the
government spending to make AD goes up lead to deal with the deflation.
Inflation is a rise in the general level of prices of goods and services in an economy over a period of
time which means he AD is high,in order to solve inflation, the government will decrease the tax
and decrease the government spending lead to make AD goes down, then inflation will decrease.
Finally. Fiscal policy can make economic is more stable
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13 years ago
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