Pros of expansionary fiscal policy:
Cons of expansionary fiscal policy:
- Pros:
1. Stimulates economic growth and reduces unemployment by increasing government spending and cutting taxes.
2. Helps to boost aggregate demand and inflation, which can aid in overcoming recessions.
3. Can support long-term economic growth by investing in infrastructure and education.
4. Can improve income distribution by providing benefits to lower-income individuals and families.
- Cons:
1. Can lead to budget deficits and increase government debt, potentially causing future economic instability.
2. May cause inflation if demand exceeds the economy's capacity to produce goods and services.
3. Can be difficult to implement effectively and may lead to inefficient allocation of resources.
4. Can create dependency on government intervention rather than promoting sustainable economic growth.