Map of Tenorio

Map of Tenorio on Fiscal policy can change the course of the economy through changes in spending and taxes. Policymakers may help restore the economy to its full potential when output falls below the full-employment level. An increase in government expenditures affects the aggregate spending and brings it to a new level. A tax cut increases consumers’ disposable income, leading to more aggregate spending. Both changes stimulate the economy and move it closer to a full-employment level of output. The difference between taxes and spending fiscal policies lies in their relative effect on the economy. A $100 increase in government purchases is a direct addition to spending. Map of Tenorio 2016.

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