Mastering Fiscal Policy: How Government Spending and Taxation Drive Economic Growth

Congress and the president carry out fiscal policy through changes in

Government Purchases and Tax Rates

government spending and taxation. Fiscal policy refers to the use of government spending and taxation to influence the economy. Here’s how Congress and the president carry out fiscal policy through changes in government spending and taxation:

1. Government Spending: Congress and the president can implement fiscal policy by changing the amount of government spending. They can increase government spending during times when the economy is facing recession or decrease spending when the economy is overheating. For example, during a recession, the government can increase spending on infrastructure projects such as roads and bridges, which can create jobs, boost economic activity, and increase consumer spending.

2. Taxation: Congress and the president can also use fiscal policy by changing taxation policies. They can decrease taxes during times of recession to stimulate spending and increase taxes during times of high inflation to reduce demand and control inflation. For example, during a recession, the government can reduce taxes such as income tax, which can increase disposable income and encourage consumer spending.

Overall, the government uses fiscal policy to achieve economic goals such as stabilizing the economy, controlling inflation, and promoting long-term economic growth. Through changes in government spending and taxation, Congress and the president have the power to influence the economy and its performance.

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