Topic 11: Fiscal Policy

Key Points

  1. Know the distinction between expansionary and contractionary fiscal policy
  2. Understand  the multiplier effect for changes to both government purchases and personal income taxes
  3. Analyze the short-run and the long-run economic impact of fiscal policy shocks
  4. Describe how larger deficits create a “crowding out” of private spending
  5. Explain the association between government deficits and trade deficits
  6. Distinguish between debts and deficits

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