Write short note on the typology of fiscal policy and explain how can fisical policybe used to stimulate the economy.
Fiscal policy is the use of government spending and taxation to influence the level of economic activity. It is one of the two main tools of macroeconomic policy, the other being monetary policy. Fiscal policy can be used to stimulate the economy by increasing government spending and/or reducing taxes.
The typology of fiscal policy can be divided into two main categories: expansionary and contractionary. Expansionary fiscal policy is used to increase aggregate demand and stimulate economic growth. This is done by increasing government spending and/or reducing taxes. Contractionary fiscal policy is used to reduce aggregate demand and slow economic growth. This is done by reducing government spending and/or increasing taxes.
Fiscal policy can be used to stimulate the economy by increasing government spending and/or reducing taxes. This will increase aggregate demand and lead to higher economic growth. For example, the government could increase spending on infrastructure projects, which would create jobs and increase economic activity. Alternatively, the government could reduce taxes, which would put more money in people’s pockets and encourage them to spend more. Both of these policies would lead to an increase in aggregate demand and stimulate economic growth.