What is the definition of fiscal policy and what are the main differences between an expansionary fiscal policy and contractionary fiscal policy

Fiscal Policy is policy designed by the government in order to influence levels of government spending and taxation. In an expansionary fiscal policy the government will opt to increase government spending on goods and services and reduce taxes to increase the disposable income of consumers. In a contractionary fiscal policy the government will opt to reduce government spending and increase taxation in order to generate government revenue and curb consumer spending in order to reduce inflationary pressures.

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Answered by Adam K. Economics tutor

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