Question

conclusion on Fiscal policy​

Answer 1

Answer:

Conclusion

Fiscal Policy

In this module, we’ve discussed how Congress and the president use fiscal policy to influence the economy through their powers to tax and spend. To encourage economic growth, Congress could lower taxes, allowing people to keep more of their earnings. In turn, people are likely to spend a portion of those earnings to buy goods and services, which, in turn, is likely to encourage businesses to increase production and employ more workers.

To encourage economic growth, Congress could also increase government spending.  For example, the government might contract with private companies to build roads and bridges. Those companies, in turn, are likely to hire workers, and those workers, in turn, are likely to spend a portion of those earnings buying goods and services. Again, greater demand for goods and services is, in turn, likely to encourage businesses to increase production and employ more workers.

So, then, what about contractionary fiscal policy?  

Recall that, while many economics textbooks suggest that contractionary fiscal policy can be used to alleviate the negative effects of inflation, most mainstream economists believe inflation is best controlled through the use of monetary policy by the Federal Reserve System. To learn more about the Federal Reserve System and monetary policy, check out the online modules Monetary Policy and In Plain English, Making Sense of the Federal Reserve from EconLowdown.