Fiscal policy is the second economy-wide policy examined in this class. Module 4 defines fiscal policy, shows its effect on real GDP and the price level, and discusses its potential short run and long run shortcomings. The effect of fiscal policy on the economy is examined using the Aggregate Demand and Supply Model.
Define fiscal policy and discuss how it affects real GDP and the price level.
Show contractionary and expansionary fiscal policy on the Aggregate Demand and Supply Model.