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How expansionary and fiscal policies work
of monetary policy. Aggregate demand may fail to grow as fast as aggregate supply, or it may even decline causing a recession. . One form of expansionary policy is fiscal policy, which comes in the form of tax cuts, transfer payments, rebates and increased government spending on projects such as infrastructure improvements. Automatic stabilizers, which we learned about in the last section, are a passive type of fiscal policy, since once the system is set up, Congress need not take any further action. To combat these low oil prices, Canada was expected to enact an expansionary monetary policy by reducing interest rates within the country.
I'm always happy to answer your questions. Should the government use tax cuts or spending increases, or a mix of the two, to carry out expansionary fiscal policy? How the multipliers effect the total GDP, a change in aggregate expenditures leads to a larger change in equilibrium in the GDP. Quantitative easing, or QE, is another form of expansionary monetary policy. Pages: 6 (1444 words comments: 0, added: 01/31/2012, category: Business, plagiarism level of this essay is: 87). Expansionary policy is a useful tool for managing low-growth periods in the business cycle, but it also comes with risks.