2.1 Expansionary Fiscal Policy is necessary to lower the recessionary gap, which tool is best, Spending...

2.1 Expansionary Fiscal Policy is necessary to lower the recessionary gap, which tool is best, Spending or Lower Taxes, and why?

2.2 If I am a Democrat looking to employ Expansionary Fiscal Policy I will favor which Fiscal Policy tool & why?

Solutions

Expert Solution

a) Increasing the spending by the government is a better policy that cutting the tax as taxes in the market will increase the disposable income and also saving, thereby reducing the affect on the increased demand in the market. so increasing the government will have a higher impact to lower the recessionary gap.

b) As a democrat, the government expenditure will be increased as that will impact the lowest level of the income earner like helping them with employment schemes or better health services.

Rahul Sunny answered 2 years ago

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