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- What are the 2 main tools the government can use with fiscal policy?
- What are the two tools of fiscal policy quizlet?
- What are the tools used to implement fiscal policy quizlet?
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What are the 2 main tools the government can use with fiscal policy?
Governments responded by trying to boost activity through two channels: automatic stabilizers and fiscal stimulus—that is, new discretionary spending or tax cuts. Stabilizers go into effect as tax revenues and expenditure levels change and do not depend on specific actions by the government.
The primary tools of fiscal policy are: government expenditure and taxation. If the economy is in a recession, the most appropriate fiscal policy would be to: increase government spending and cut taxes, thus running a higher budget deficit.
Taxation and government spending are tools of the federal government (president and congress). Changing the discount rate and open market activities (buying and selling treasuries) are tools of the Fed. Raising taxes slows down the economy.
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