Answer to Question #187297 in Economics of Enterprise for Sabina

Question

Explain how the fiscal policy can be used to influence government objectives

Answer 1

Fiscal policy refers to the use of taxes and government spending to control the aggregate demand.

• In times of recession, the government can use the fiscal policy by reducing the taxes and increasing government spending to boost the aggregate demand.
• During boom periods, the government uses the fiscal policy by reducing government spending and increasing taxes to control the aggregate demand in the economy.