Principles of Macroeconomics: "12.2: The Use of Fiscal Policy to Stabilize the Economy"

Read this section to learn about how the government's fiscal actions influence aggregate demand. This section first discusses automatic stabilizers and how they function. It then covers discretionary fiscal policy, which are changes in aggregate demand resulting from changes in government purchases, income taxes, and transfer payments. Attempt the "Try It” exercises at the end of the section.