During a recession, the government increases federal spending through expansionary fiscal policy to stimulate the economy. This helps address the challenges of decreased output and unemployment.
During a recession, the government typically changes fiscal policy to improve the U.S. economy by increasing federal spending through an expansionary fiscal policy. This helps stimulate output and decrease unemployment, addressing the economic challenges during a recession.
Expansionary fiscal policy is most appropriate when an economy is in a recession and producing below its potential GDP, as it boosts aggregate demand. On the other hand, contractionary fiscal policy is used when an economy is producing above its potential GDP.
However, it is important to consider the financial consequences of these actions, such as increased government budget deficits and national debt, when implementing fiscal policy measures.
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