Week 4_1 Fiscal Policy

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Get to know Basic Concepts:

-- Fiscal policy refers to actions by the government, either by adjusting government spending or changing tax rates, to influence an economy’s performance.

-- To deflate (slowdown) the economy the government will increase taxes and reduce government spending.

      -> real GDP growth and inflation will slow down.

-- To inflate (boost) the economy the government will decrease taxes and increase government spending.

      -> real GDP growth and inflation will increase.

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Question: 

Where is the inflationary gap?

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Discuss with fellow students in Discussion Forum. 
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