fiscal policy
... What is the difference between contractionary and expansionary fiscal policy? Expansionary and contractionary fiscal policies are completely opposites policies; both meant to stabilize the economy in opposing situations. In a recession economy, such as the US has been in for the last couple of years, the government takes on an expansionary fiscal policy, cutting taxes and increasing government spending to boost the economy. ... This type of policy is quite evident with all the recent tax cuts under the Bush administration. In a strong economy, the government takes on a contractionary fiscal policy, increasing taxes and reducing spending to help fight inflation. ... What is meant by "laissez-faire policy"? Is this policy applied today? Laissez-faire policy is a policy of government non-involvement in guiding the economy. ... This policy is definitely not applied today. ... What factors potentially limit the effect of fiscal policy (i. ... The effectiveness of fiscal policy is limited by several factors. The first major area is that the government must have solid grasp on the state of the economy to accurately set policy.